FRANKFURT: Auto giant Volkswagen cut its 2024 forecasts Friday, as it battles a deep crisis that it has warned could prompt the closure of factories in Germany for the first time.

One of Germany’s best-known firms, Volkswagen shocked employees at the start of this month when it said that it needed to urgently restructure, including possibly shuttering plants at home and implementing deep job cuts. The carmaker, which has some 300,000 workers in Germany, has been hit hard by high manufacturing costs, a stuttering switch to electric vehicles and rising competition in key market China.

In the latest sign of its problems, the 10-brand group cut a host of forecasts for this year.

VW said that it now expected revenues to be about 320 billion euros ($357 billion), after previously forecasting they would grow five percent from 322.3 billion euros in 2023.

The group—whose brands range from its core VW models to Seat, Skoda and Porsche—also said it expected to deliver nine million vehicles. Previously it had forecast deliveries would increase up to three percent this year from the 9.24 million vehicles it delivered in 2023.

VW cited a “challenging market environment and developments that have fallen short of original expectations” as reasons for cutting its forecasts. It said the problems are affecting all its main divisions making passenger cars, commercial vehicles and components. In addition, it cut its forecast for operating return on sales to around 5.6 percent, from a previous forecast of 6.5 to 7.0 percent.

Also weighing on VW was a “deterioration in the macroeconomic environment,” the carmaker said. The outlook for Germany’s economy, and the broader eurozone, has darkened in recent times. Meanwhile China—where VW makes around a third of its sales—also continues to struggle. The forecast cuts come just two days after VW’s bosses began talks with workers’ representatives on a new pay deal following the bombshell announcement that drastic cuts were needed.

Unions have vowed “bitter resistance” to any attempt to close factories in Germany or carry out mass layoffs, while VW’s bosses insist cuts are needed to keep the company competitive. — AFP