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VW forced to consider further cost cuts

Volkswagen is considering extending its €2bn (£1.3bn) cost-cutting plan just three months after it was unveiled, as the weak German market threatens its profit targets.

Sources close to VW said the company had not yet decided whether further cost cuts were necessary but plans were being drawn up for consideration by the board.

It is not clear whether they would involve further job losses above the 5,000 already announced.

The cost-cutting plan, termed ForMotion, involves €2bn of savings by the end of next year, and comes on top of €1bn (£662m) annual savings demanded by Bernd Pischetsrieder, chief executive.

The company would not comment yesterday but Mr Pischetsrieder, in an interview with the FT earlier this month, defended the plan as generating "sustainable" savings, which would be repeated each year.

VW has forecast operating profits higher than last year's €2.5bn (£1.7bn).

However, the carmaker has been forced to revisit the plan by bigger than expected falls in the German market, which accounts for 19 per cent of VW's sales.

German car sales fell 7.3 per cent in May, according to figures released by the Association of European Automobile Manufacturers yesterday, bringing their decline so far this year to 2.5 per cent.

General Motors this week admitted it could not avoid a loss at its European business this year. (Source: FT.com)

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