Volkswagen considers shutting down factory in Germany amid challenges

German automotive giant Volkswagen said Monday it could close production sites in Germany, as the auto industry struggles to manage rising costs.

"In the current situation, even plant closures at vehicle production and component sites can no longer be ruled out," Volkswagen said in an internal memo sent to employees and seen by AFP.

Europe's largest auto manufacturer remained committed to Germany as a "business location" but "headwinds have become significantly stronger", VW brand CEO Thomas Schaefer was quoted in the document as saying.

The challenging conditions meant "we must now step up our efforts" to secure the long-term success of the company, Schaefer said in the note sent to employees.

"We want to remain the leading volume manufacturer worldwide –- and do so on our own strength," Schaefer said.

Volkswagen last year announced plans for a 10-billion-euro ($11-billion) savings programme and has flagged cuts to its workforce over the coming years to improve profitability.

But the group said further measures were now required after disappointing results published in August that showed a dip in profits.

Rising costs and cooling demand in China also meant the group had to lower its profit margin forecasts for the rest of the year.

The core of the Volkswagen group "now faces particularly significant challenges", the memo said.

Despite the cost-saving measures already announced, "the current developments in the automotive market and the German economy demand further action", it said.

The company's board had determined that "the brands within Volkswagen AG must undergo comprehensive restructuring".

"The goal must be to optimise product costs, material costs, and sales performance, as well as factory and labour costs," the memo said, evoking possible plant closures.

"Simple cost-cutting measures" were no longer enough, while the group said it was open to further job cuts, according to the memo.