Volkswagen announces possible closing some of its factories

German carmaker Volkswagen announced on Monday that it may close a number of its factories in Germany as the car manufacturing group struggles to manage rising costs.

“In the current situation, it is no longer possible to rule out the closure of production sites and components” for cars, Volkswagen CEO Thomas Schafer said in an internal memo seen by Agence France-Presse.

The document quoted him as saying that Europe’s largest car manufacturer remains committed to Germany “as a location for its business” but that “the headwinds have become much stronger,” according to Al Arabiya.

He said that the difficult circumstances mean that “we must now intensify our efforts” to ensure the company’s success.

Schaafer said, “We want to remain the largest manufacturer in terms of volumes in the world and to do so in line with our strength.”

Volkswagen announced plans last year for a 10 billion euro ($11 billion) savings program and indicated its intention to reduce its workforce over the coming years to improve its profits.

But the group said more action was needed now after disappointing results published in August showed a decline in profits.

Rising costs and weaker demand in China also meant the group had to cut its profit margin forecast for the rest of the year.

The note said the Volkswagen Group was “currently facing significant challenges” at the core of its business.

Despite the cost-cutting measures already announced, “current developments in the automotive market and the German economy require further action.”

The company’s board concluded that “the brands within the Volkswagen Group must undergo a comprehensive restructuring.”

“The aim should be to improve product and material costs, sales performance, plant and labour costs,” the note said.

It added that “simple cost-cutting measures” were no longer sufficient, indicating that it was open to job cuts.