FAW-Volkswagen downsizing staff in 2nd plant

Chinese-German carmaker FAW-Volkswagen Automotive Co., Ltd. is said to have begun downsizing the employees in its second plant due to the poor sales of two sedan models - Magotan and Sagitar.

People close to the company confirmed the saying, adding that it had dismissed over 700 employees. It is the unsatisfactory sales volumes of both Magotan and Sagitar that leads to the job cut, according to the insider.

Currently, dealers of both sedan models nationwide are confronted with rising inventory pressure. Large inventory urged FAW-Volkswagen to lower the prices of car models including Magotan, Sagitar and Bora Classic to a large extent in the past few months. The markdown it launched on Magotan in Beijing is as high as CNY 25,000.

So far, part of the production lines for Magotan and Sagitar in the second plant has suspended operation, added the insider. They are expected to be used for the mass production of New Bora, a completely new car model the company rolled out this year. The car model, which debuted on the 2008 Beijing International Automotive Exhibition this April, has been put into trial mass production. As a strategic car model of FAW- Volkswagen, it will be marketed with the mission to boost the company's sales volume.

FAW-Volkswagen, a 50-50 venture between German auto giant Volkswagen AG and China-based FAW Group, aimed to sell 590,000 vehicles in 2008. However, it sold only 264,992 units in the first half of this year, accounting for about 44.9 percent of its 2008 sales target. In order to lift sales, it appointed Hu Yong as the general manager of FAW-Volkswagen Sales Co., Ltd. after Weiming Soh, the former head of the sales unit, stepped down this June.

It was not a simple management change, as Hu was prompted with the mission to rebuild the image of the FAW-Volkswagen brand. Hu will release a series of new policies, an effort to help its dealers nationwide resume confidence in the brand.

Previous sources said that the first job for Hu to do after his succession was deal with the inventory of both FAW- Volkswagen and its dealers nationwide. In addition, FAW- Volkswagen Sales is reportedly to have asked its dealers to attach more importance to the promotion of Magotan and Sagitar, two sedan models with large inventory.