Volkswagen Q3 profit slumps as major overhaul looms

VOLKSWAGEN said on Wednesday (Oct 30) its third-quarter operating profit plunged 42 per cent as weak performance in the core passenger car unit and high costs, including for model revamps, hit the automaker.

After nine months, the operating return on sales in the core unit fell to 2 per cent. “This highlights the urgent need for significant cost reductions and efficiency gains,” finance chief Arno Antlitz said in a statement.

A rare bright spot in earnings was improving order intake in Western Europe in July through September, as new models were gradually entering the market, providing a tailwind for the final quarter, Antlitz added.

Complex governance structures, misjudged investments in electric vehicles, poor management decisions, sliding revenues from China and Germany’s crippling bureaucracy have all been blamed for the challenges facing the world’s second-biggest automaker.

Europe’s top automaker cut its annual outlook twice during the quarter, joining peers BMW and Mercedes-Benz in reporting difficulties.

Earnings before interest and taxes (Ebit) fell to 2.86 billion euros (S$4.09 billion) in the July-to-September period, largely in line with LSEG’s mean estimate of 2.80 billion euros.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

Year-to-date, Volkswagen’s stock has lost about a fifth, underperforming a drop of 10 per cent in the pan-European automotive index.

The company is locked in a battle with unions over a planned overhaul that includes potential plant closures on home soil for the first time in its 87-year history.

A second round of talks between Volkswagen and powerful German union IG Metall is set to start later on Wednesday, after the works council head threatened to break off talks and launch strikes.

SEE ALSO

VW eyes closing 3 German factories in cost-cutting push

The automaker plans to lay off tens of thousands of staff, close three factories in Germany, as well as cut salaries by 10 per cent and freeze pay in both 2025 and 2026, according to the works council head, Daniella Cavallo.

The proposed 10 per cent wage reduction at the core brand alone would bring in almost 800 million euros annually, German business daily Handelsblatt said on Tuesday, adding that VW wanted to achieve the majority of its billion-euro savings drive through pay cuts.

The IG Metall-dominated works council, which has immense clout at VW, where labour representatives hold half the seats on the supervisory board, asked for a rise of 7 per cent and threatened strikes from Dec 1 if its demands were not met. REUTERS