By Rachel More
BERLIN, May 20 (Reuters) - Germany's Volkswagen is not currently in talks with Chinese manufacturers regarding overcapacity at its car plants in Europe, although the problem does have to be addressed, CEO Oliver Blume told a general assembly of workers on Wednesday.
The meeting comes amid heightened speculation over the future of Volkswagen's German factories as falling profits, weak demand and intense competition put Europe's biggest carmaker under pressure to scale back its sprawling
network.
"We still have excess capacity at our plants in Europe and Germany. We need to address this in order to remain competitive," Blume said in Wolfsburg, adding that there were "currently no plans or discussions with Chinese manufacturers".
COST-CUTTING DRIVE IN DIFFICULT MARKET
The CEO said three years of belt-tightening - including 50,000 job cuts in Germany, with cuts at its Audi and Porsche brands - had made it robust for uncertain times rocked by steep tariffs and shifting markets.
However, he warned that the carmaker would not return to pre-pandemic sales in Europe, and that the group's decades-long business model of exporting cars to the world from Germany was being replaced by a need to localise in key markets like China, where Volkswagen operates via joint ventures with locals.
Volkswagen has vowed to avoid factory closures in agreement with German unions and the company's powerful works council.
Late last month, Blume said contracts with defence companies or Chinese plant-sharing deals could offer solutions, sparking media speculation over possible partnerships like recent deals struck between Stellantis and Chinese carmakers.
Fearing for local industry, government officials in the states of Lower Saxony and Saxony have expressed openness to plant partnerships with the Chinese.
But with Chinese carmakers like BYD and Chery looking to build up market share in Europe, others have cautioned that partnering up could offer a helping hand to rivals.
WORKS COUNCIL PUSHES BACK AGAINST 'TAKEOVER TARGET' IMAGE
Volkswagen is advancing with talks to sell its plant in Osnabrueck, northern Germany, to a defence partner.
At its plants in Wolfsburg, Emden and Zwickau, the company says it already reduced costs by over 20% on average last year.
Works council head Daniela Cavallo called for an end to speculation over the future of the German sites.
"One gets the impression that Volkswagen is almost a takeover target and needs to be rescued," Cavallo told thousands of workers at the staff assembly.
She called on management to focus on success with Volkswagen's products rather than "the umpteenth debate about alleged plant closures or supposed talks with third parties regarding alternative uses for our plants".
(Reporting by Rachel More;Editing by Madeline Chambers and Emelia Sithole-Matarise)
