BERLIN (Reuters) – Volkswagen may have to set aside up to 4 billion euros ($4.4 billion) in provisions for planned capacity cuts as early as the fourth quarter, Jefferies analysts warned on Monday after meeting with the automaker’s North American executives.

Volkswagen announced earlier this month that it was considering closing factories in Germany for the first time in its history as part of a cost-cutting plan as it faces competition from Asian rivals.

The announcement sent shockwaves through the global auto industry and raised concerns among the German government, as Volkswagen is the country’s largest industrial employer.

“The logic of right-sizing VW’s namesake (brand) is not new, but management’s sense of urgency and determination to address excess capacity and spending patterns is,” Jefferies analysts wrote in a note published Monday.

“Three days on the road in North America with management have given us the conviction that there is no plan B that would exclude a reduction in capacity,” they said, adding that the decisions could lead to provisions of three to four billion euros in the fourth quarter.

Jefferies did not specify the purpose of the visit.

Volkswagen declined to comment.

As part of its restructuring plan, the group has decided to scrap a series of collective agreements that included decades-old job guarantees at six German plants, running afoul of unions that have vowed to fiercely resist such measures.

“Unions should feel pressured to reach new agreements, while VW will be able to force layoffs. There is a risk of plant disruption, but unions can only strike over wages, not plant closures or layoffs if the latter are not contractually protected,” Jefferies wrote.

(Reporting by Victoria Waldersee; written by Christoph Steitz, Diana Mandiá, edited by Blandine Hénault)

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