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VW, Porsche suspend production in Germany

01:00 AM EST on Saturday, November 29, 2008

By Andreas Cremer

Bloomberg News

Volkswagen and Porsche said they’ll suspend production at their hometown plants in coming weeks as the global recession reaches to the heart of the German automotive industry, Europe’s biggest.

VW will shutter its factory in Wolfsburg from Dec. 18 to Jan. 11, according to a company official who declined to be identified. Porsche will halt output in Stuttgart for seven days between now and the end of January. Each plant is its owners biggest and located at the global headquarters.

Volkswagen employs 44,000 people in Wolfsburg, a quarter of its 175,000-strong German workforce. Production is being cut after vehicle sales fell 5.1 percent last month, even with a lineup of models such as the Golf and Polo that are regarded as well-suited to customer requirements for smaller, less costly and more fuel-efficient cars. Porsche suffered a 50 percent drop in deliveries in October, including a 40 percent decline in sales of its trademark 911 sports car.

“I don’t think that Porsche’s customers have suddenly fallen into poverty, but they’re reacting to the fact that it may be inappropriate to pull up in a new Porsche when their neighbor’s house is being foreclosed,” said Christoph Stuermer, an analyst at research firm IHS Global Insight in Frankfurt. “For VW, the closure shows the new Golf can’t defy gravity,” he said.

Volkswagen, Europe’s largest carmaker, will also shutter parts of the Wolfsburg plant on Dec. 5, the official said. In addition to the next generation of the best-selling Golf, the factory makes components for the Golf-based Variant station wagon and assembles the Touran minivan and Tiguan compact sport-utility vehicle. The halt in production has yet to be approved by management and labor representatives.

“No company is able to extricate itself from this crisis, not even Volkswagen,” said Frank Schwope, a Hanover-based analyst at NordLB with a sell recommendation on the stock. “It would be a delusion for any carmaker to expect to get through this maelstrom without extending Christmas vacation.”

Production at Porsche’s Stuttgart plant was already halted for one day last week, the company said in a statement, without specifying on which days the other closures will fall. Wages won’t be affected because of overtime already banked by workers.

Georg Stuerzer, a Munich-based analyst with UniCredit, said the stock-market reaction to Porsche’s announcement was much too negative as the stoppages equate to only about 1,500 cars.

Other European carmakers are already firing or laying off workers to rein in production and clear inventories of unsold vehicles that have grown since the start of the year.

PSA Peugeot Citroen, Europe’s second-biggest carmaker, plans to slash 3,550 posts through voluntary departures, among them 2,700 office jobs, the Paris-based company said Nov. 20. The cuts follow the elimination of 15,000 positions in the past two years as the company sought to reduce costs.

Renault, the French number two, has almost no production left to cut this year after announcing 6,000 job cuts in the summer and shuttering several plants through December, Michel Gornet, head of manufacturing and logistics, said Nov. 18.

Bayerische Motoren Werke AG, the worlds largest maker of luxury autos, is reducing the global workforce by 8,100 people. The company will also eliminate 500 temporary posts at its factory in Leipzig, Germany, it said today.