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Same-Day Analysis

VW Denies Belgian Plant Closure, but Will Withdraw Golf Production from Forest Plant

Published: 21 November 2006
After staff stopped work at the Forest plant in Belgium, VW said it would bring forward a meeting with the plant's management and works council to discuss the site's future options.

Global Insight Perspective

 

Significance

The German carmaker confirmed that it was planning to restructure the Belgian production site but ruled out a closure of the Forest plant.

Implications

The Forest plant, on the outskirts of Brussels, has always been in a delicate situation although its productivity and profitability levels are more than acceptable. The plant produces the VW Golf and Polo models since assembly of the VW Lupo and Audi A3 ended in early 2005. As part of a deal with German workers to obtain labour concessions, VW agreed to centralise Golf production in Germany, meaning that the future of the Brussels plant was hinging on the Polo model, whose replacement version is also very likely to be centralised in Spain.

Outlook

Following the first meeting with the plant's representatives, VW confirmed in a statement that it will effectively withdraw production of the VW Golf from Belgium to centralise production of the high-volume model in Germany. This is part of a far-reaching restructuring programme aimed at reducing capacity in Western Europe while expanding production closer to the growth markets of China, Russia and India.

Workers at the Volkswagen (VW) plant in Forest, Belgium have downed tools since Friday (17 November) because of worries about their future and have announced their intention not to resume work until they receive guarantees about their jobs. Concerns about the Forest plant's future emerged following a top management reshuffle at the VW headquarters in Wolfsburg. Uncertainty has been further fuelled by German press reports speculating that VW may announce production cuts at Forest, which could mean the loss of several thousand jobs, while the plant's management refused to inform workers about the company's future plans for the plant before a works council meeting scheduled for Wednesday (22 November). With no reference to individual plants' futures following the VW Group's supervisory board meeting last Friday, psychological pressure increased on employees, who decided to stay away from work until they receive information from Wolfsburg. 

 

Yesterday (20 November), the VW Group issued a statement saying that the company will start consultations with the employee representatives in Brussels today about a restructuring programme for the Brussels plant. No decisions have been taken so far, but will follow once the consultative talks have been concluded. The carmaker also stressed that there are no plans to close the plant. 

 

Outlook and Implications

 

The Forest plant in the outskirts of Brussels has always been in a delicate situation although its productivity and profitability levels are more than acceptable. The plant essentially produces the VW Golf and Polo models since assembly of the VW Lupo and Audi A3 ended in early 2005. As part of a deal with German workers to obtain labour concessions, VW agreed to centralise Golf production in Germany, meaning that the future of the Brussels plant was hinging on the Polo model, whose replacement version is also very likely to be centralised in Spain. Even though the closure of the site is not on the agenda, a restructuring plan may lead to the elimination of 2,000 jobs if the carmaker wants to go forward with plans to abandon two shifts. VW employs about 5,100 people at the Forest plant. 

 

While consultations start with the plant's management and works council today, the VW Group issued another statement, confirming that the Forest plant will undergo a restructuring in line with the company's overall plans to cut overcapacity in Western Europe. The carmaker also confirmed that in line with the agreement it has reached with German workers in October, Golf assembly will be centralised at the Wolfsburg and Mosel plants in Germany. 

VW said "The Western European automotive market is largely saturated and is struggling with excess capacity. VW’s Western European plants are not running at full capacity, despite a rise in market share. Export opportunities, too, cannot be expanded significantly due to the US dollar exchange rates and high import duties in growth markets, among other factors. The growth markets of the future are above all Russia, India and China. VW has therefore initiated a far-reaching restructuring at its German locations. The core element is a reduction by up to 20,000 jobs in Germany, much of which has already been implemented. Additional optimization measures in Germany are planned". However, the carmaker explained that other production sites in Europe will have to be restructured in order to align production levels to a less dynamic regional market. VW's plant in Belgium is the first outside Germany to be "officially" earmarked for production cuts, but the company's Pamplona and Martorell plants in Spain and the Autoeuropa facility in Portugal could also be "politely" asked to participate in the capacity reduction efforts.

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