High costs, slowing China: VWs perilous road ahead [Video]

After Volkswagen’s bombshell announcement earlier this month that it could close factories in Germany for the first time, company management and unions will begin tense talks on a new pay deal Wednesday.

Here are some of the key challenges facing Europe’s biggest car maker:

– High costs –

Volkswagen has repeatedly stressed that its costs are excessive and profit margins too low, particularly at its core VW brand.

Production costs in Germany are “clearly too high”, said a leaflet from VW’s management distributed to the workforce at several sites in the country ahead of the talks.

“We have to increase our productivity. We have to reduce our labour costs.”

All areas would be examined — from development, to manufacturing and distribution — when it comes to cost-cutting, VW group CEO Oliver Blume told public broadcaster ZDF in an interview this week.

High electricity prices, which have risen since the energy crisis triggered by the …