FRANKFURT -- Volkswagen Group will suspend production this week at plants in Italy, Portugal, Slovakia and Spain and is preparing to shut down the rest of its factories across Europe due to the spread of coronavirus.
"Given the present significant deterioration in the sales situation and the heightened uncertainty regarding parts supplies to our plants, production is to be suspended in the near future at factories operated by group brands," VW Group CEO Herbert Diess said on Tuesday.
Production will be halted at VW's Spanish plants, Setubal in Portugal, Bratislava in Slovakia and the Lamborghini and Ducati plants in Italy before the end of this week, Diess said.
Most of the other German and European plants will begin preparing to suspend production, probably for two weeks.
"The individual brands will communicate details of operating plans as soon as possible," Diess said.
VW Group's powerful works council has concluded it's not possible for workers at its plants to maintain a safe distance from one another to prevent contagion and recommended a suspension of production.
Forecast 'impossible'
VW Group, which owns the Audi, Bentley, Bugatti, Ducati, Lamborghini, Porsche, Seat and Skoda brands, said on Tuesday that the uncertainty about the fallout from the pandemic meant it was impossible to give any forecasts for its performance this year.
"2020 will be a very difficult year. The corona pandemic presents us with unknown operational and financial challenges. At the same time, there are concerns about sustained economic impacts," Diess said.
Only last month Volkswagen had predicted that vehicle deliveries this year would be stable at 2019 levels and forecast an operating return on sales in the range of 6.5 percent to 7.5 percent in 2020, but said this depended on external factors.
CFO Frank Witter said it is uncertain how severely or for how long the spread of coronavirus will also affect the automaker. "Currently, it is almost impossible to make a reliable forecast," he said.
VW Group said its full-year operating profit rose 22 percent to 16.9 billion euros ($18.5 billion) in 2019, thanks to strong sales of higher-margin cars and lower diesel charges, defying an industry downturn that has cut the earnings of rivals.
Earnings were driven by higher profits at its VW, Porsche, Seat and Skoda brands, and a return to profitability for Bentley.
Improvements in the mix and price positioning in particular compensated for lower sales of Volkswagen Passenger Cars models and for launch costs and negative exchange rate effects, the company said.
Automakers are navigating "a landscape of plummeting worldwide demand” as workers quarantine in China, Europe and the U.S., Bloomberg Intelligence analysts Kevin Tynan and Michael Dean said in a report.
Bloomberg contributed to this report
