Volkswagen third-quarter profit slumps as major overhaul looms
By Andrey Sychev
(Reuters) -Volkswagen said on Wednesday its third-quarter operating profit plunged 42% 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%. “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 (ETR:BMWG) and Mercedes-Benz (OTC:MBGAF) in reporting difficulties.
Earnings before interest and taxes (EBIT) fell to 2.86 billion euros ($3.09 billion) in the July-to-September period, largely in line with LSEG’s mean estimate of 2.80 billion euros.
VW shares were down 1.8% in early Frankfurt trade by 0705 GMT.
Year-to-date, Volkswagen (ETR:VOWG_p)’s stock has lost about a fifth, underperforming a drop of 10% in the pan-European automotive index.
TOUGH TALKS
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.
The automaker plans to lay off tens of thousands of staff, close three factories in Germany, as well as cut salaries by 10% and freeze pay in both 2025 and 2026, according to the works council head, Daniella Cavallo.
The proposed 10% wage reduction at the core brand alone would bring in almost 800 million euros ($864 million) 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% and threatened strikes from Dec. 1 if its demands were not met.
($1=0.9244 euros)