Volkswagen may sell a German casting plant, as part of a wider effort to cut costs, but no decision had been taken yet, the car maker said on Wednesday.
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“We are holding talks on the sale of the casting plant in Hanover,” a Volkswagen spokesman told Reuters, confirming a report by Germany’s Manager Magazin which said the company wanted to sell the plant that employs 1,250 workers.
Two parties were seriously interested, the German magazine reportedly said, citing sources familiar with the situation.
Reuters noted that Volkswagen is examining its in-house component production amid an ongoing restructuring programme to boost pre-tax profit by EUR4bn over four years. In future, it wants to rely more on parts suppliers.
“Casting operations are very labour intensive and in a high-wage country like Germany that can be quite expensive, particularly since employees there likely receive bonuses for the severe working conditions,” Willi Diez, an automotive industry professor at the university of applied sciences in Nuertingen, told the news agency.
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By GlobalData“Suppliers operate under other conditions for different wages,” he added, referring to Volkswagen’s labour costs, which are the highest in the industry.
According to Reuters, the car maker denied it was in the process of selling its axle production plant in Braunschweig, which Manager Magazin also reported.
But MM Warburg analyst Marc-Rene Tonn told the news agency: “Axles are certainly something they should take a look at, since reducing the amount of components they make themselves raises their flexibility.
“Much of what Volkswagen can restructure at its components business depends on the outcome of the talks with unions,” Tonn added.
Reuters noted that some analysts have called for management to take bolder steps than just the disposal of certain parts operations and to sell or close entire assembly plants – such as its factory in Brussels – to reduce significant overcapacities in the group.
“This would be very expensive, with worker payoffs and asset write-offs, but the question remains more of a both-this-as-well-as-that instead of either/or,” Nuertingen’s Diez told the news agency.
