Volkswagen's German battery plant to stay at half capacity amid cost pressures

BERLIN (Reuters) - Volkswagen's PowerCo battery subsidiary will build just one of two planned production lines at its Salzgitter plant in Germany for now, its works council said, as the sector adjusts to slowing demand for electric vehicles.

Group technology chief Thomas Schmall on Thursday showed a staff meeting a slide showing plans for just one production line at the plant totalling 20 gigawatt hours of capacity, a works council spokesperson said.

The factory has space for two lines but just one is under construction, with plans for a second on hold.

"This is a clear declaration of war on the factory's staff," the spokesperson said, as workers feared the second line may be scrapped as part of a wider cost-cutting drive at the company.

A series of staff meetings took place across the carmaker's plants this week after it made a bombshell announcement on Monday threatening to close plants and do away with job guarantees at its Volkswagen brand, saying it had just 1-2 years to "turn things around".

Volkswagen has previously said the Salzgitter factory would gradually expand capacity to 40 gigawatt hours per year, but has not provided a timeline. A PowerCo spokesperson said the company was still planning to begin production at Salzgitter in 2025 as planned.

"The further expansion of production capacities will be driven forward flexibly and in line with demand," the spokesperson added.

PowerCo's three announced plants in Salzgitter, Spain's Valencia and Ontario, Canada, have a combined capacity of up to 170 gigawatt hours.

Schmall told Germany's FAS newspaper last month that the plants in Spain and Canada could be expanded but it remained to be seen whether that would happen.

(Reporting by Christina Amann, Victoria Waldersee, editing by Emma-Victoria Farr and Jason Neely)