Carmakers curb China output as sales growth stalls

Tue Sep 15, 2015 8:40am EDT
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By Andreas Cremer and Norihiko Shirouzu

FRANKFURT/BEIJING (Reuters) - Volkswagen and other major carmakers have begun reining in Chinese output, wages and other costs, industry sources told Reuters, as executives at the Frankfurt auto show put a brave face on a sharp slowdown in the world's biggest vehicle market.

The German car giant's Chinese joint venture, FAW-VW, is cancelling staff bonuses and cutting shifts at its plants near Changchun, northeastern China, people with knowledge of the matter said. The bonuses being scrapped typically account for more than half of the assembly-line workers' take-home pay.

Volkswagen's (VOWG_p.DE: Quote) high-end Audi brand also said it had eased back output at its Chinese plants, trimming the working week to five days from seven in response to lower demand for models such as the A6 saloon.

And German rival BMW (BMWG.DE: Quote) said on Tuesday it had reduced output of its locally produced 3 and 5 series models. "We reacted relatively fast," Chief Financial Officer Friedrich Eichiner told journalists. "We are not stockpiling."

Car sales in China, until recently the profit engine for automakers around the world, have been hit by a cooling economy and a plunging stock market. Demand was flat in the first eight months of the year and could drop in 2015 for the first time since the market took off in the late 1990s.

At the opening day of the Frankfurt auto show on Tuesday, industry executives expressed confidence about the long-term growth potential of the Chinese market, and said any short-term hit could be offset by a strengthening recovery in Europe.

Industry data showed European car sales jumped 11.5 percent year-on-year in August.

But some analysts said the Chinese slowdown was coming at a time when carmakers are still opening factories in the country -- creating an excess of capacity that could weigh on profits.   Continued...

Visitors stand around cars during the Volkswagen group night ahead of the Frankfurt Motor Show (IAA) in Frankfurt, Germany, September 14, 2015.    REUTERS/Kai Pfaffenbach