Volkswagen is warning that it might need to close factories in Germany because the country is losing its edge as a manufacturing hub.
The company has described its financial situation as "tense" and said that large-scale cuts, including factory closures, might be necessary.
According to CNBC, Volkswagen may have to take these steps to "future-proof" the company, as the financial pressures it faces can't be solved with simple cost-cutting measures.
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"The European automotive industry is in a very serious situation," said Volkswagen Group CEO Oliver Blume in a statement.
He noted that the economic environment has become tougher, with new competitors entering the European market.
"Germany as a manufacturing location is falling behind in terms of competitiveness," Blume added.
VW brand CEO Thomas Schäfer also expressed concern, saying, "The situation is extremely tense and can't be fixed with simple cost-cutting." He stressed the need for talks with employee representatives to find ways to restructure the brand sustainably.
Unions have already started to criticize the potential closures, warning that they pose "a massive threat to jobs" and could "risk destroying the heart of Volkswagen."
This comes after Volkswagen reported last month that its operating profit for the first half of the year was €10.1 billion ($AU16.47bn), down 11% from 2023.
This isn't the first time Volkswagen has hinted at plant closures.
In July 2024, Audi, a Volkswagen subsidiary, announced plans to end production of the Q8 e-tron and Q8 Sportback e-tron early due to declining demand and ongoing challenges at its Brussels site.
