Over the past weekend, worries about Volkswagen’s (VWAGY) manufacturing in Germany intensified. On September 10, the company ended job projections for its 120,000 domestic workers.
VW faces severe competition from cheaply priced Chinese vehicle imports. In addition, energy costs are rising while demand for electric vehicles is down. Europe’s economy is also slowing. For the first time, VW may need to close plants in the country.
The company may not easily cut jobs, since Germany has a powerful union.
On Tuesday, luxury automotive firm BMW (BMWYY) slashed its profit margin forecast. This sent BMWYY stock down by 10.44%. The firm faces higher costs related to the repair of a braking system in 1.5 million vehicles. The higher warranty costs will hurt its profits in the second half of the year.
BMW also said that stimulus measures in China were insufficient to strengthen vehicle demand. The firm cut its EBIT margin guidance to 6.0% to 7.0% for the year. This is down from 8%-10%.
The bad news hurt American vehicle firms. Ford (F) lost over 3%, General Motors (GM) dropped by 5.4%, and Stellantis (STLA) lost 2.64% on Tuesday.
Be wary of car stocks. The global economy is headed toward a recession. Small rate cuts are unlikely to boost economic growth enough to help increase the demand for cars.
