Volkswagen may book 3-4 billion eur in provisions on capacity cuts, Jefferies says

FRANKFURT (Reuters) – Volkswagen (ETR:) may book billions of euros in provisions for planned capacity cuts as early as the fourth quarter, brokerage Jefferies wrote in a note after accompanying the carmaker’s management.

The comments by Jefferies come after Volkswagen earlier this month said it was considering shutting plants in Germany for the first time in its history, a move aimed at bringing down costs as Asian competition is closing in.

“The rationale to re-size VW’s namesake is not new but management’s sense of urgency and determination to tackle excess capacity and spending patterns both are,” Jefferies analysts said in a note.

“Three days on the road … with management gave us conviction that there is no plan B that would rule out capacity reduction,” Jefferies said, adding decisions could lead to provisions of 3 to 4 billion euros ($3.3-4.4 billion) already in the fourth quarter.

Volkswagen was not immediately available for comment.

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