Volkswagen (ETR:) stock experienced a decline on Wednesday following a profit warning issued by the German auto giant. The company indicated that it may potentially close a plant belonging to its luxury brand Audi.
As of 06:05 ET (10:05 GMT), VW stock had dropped by 0.7% to €111.67, marking a year-to-date decrease of 6%.
Volkswagen revised its 2024 operating return on sales forecast to 6.5%-7% from the previous range of 7%-7.5%. Additionally, it was revealed that the Audi brand is contemplating the closure of its Brussels site, which currently employs around 3,000 individuals, due to weak demand for its upscale electric vehicles.
The company stated that the expenses associated with either repurposing the Brussels plant or shutting it down, along with other unforeseen costs, could amount to as much as €2.6 billion in the 2024 financial year.
Analysts at Jefferies commented, “We view this announcement as part of VW’s cost efficiency and resizing efforts, potentially signaling forthcoming restructuring initiatives within the European automotive sector in the years ahead.”
Jefferies maintains a ‘buy’ rating on Volkswagen, with a target price of €150.
According to analysts at Stifel, the output of the Brussels plant has dwindled from approximately 120,000 units in 2012 to fewer than 40,000 units in 2024.
In light of this, Stifel remarked, “We consider the decision to reduce capacity at Audi [as] a positive move.”
Stifel also holds a ‘buy’ rating on the German automaker, with a target price of €149.