VW profit plunge sets stage for union negotiations
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The news: Volkswagen reported a 64% drop in quarterly net profit, amid slumping sales in China and rising costs in Europe, hitting its lowest operating margin since the pandemic.
The context: CFO Arno Antlitz said the results highlight the “urgent need for significant cost reductions” in what he said was a challenging environment.
He reiterated the VW brand needs to find over €10 billion in cost savings to remain competitive, cautioning that it will be difficult to meet the EU's stricter CO2 emissions standards next year. He said Volkswagen might need to pool with another manufacturer, Bloomberg reported.
The results came just hours before the 87-year-old company was due to resume negotiations with unions over its restructuring plans, including its first-ever factory closures in Germany and potential wage cuts for some employees.
Workers blame management for bungling decisions and are demanding a 7% pay rise. Earlier this week, they revealed VW plans to close at least three factories in Germany, lay off tens of thousands and impose a 10% pay cut among workers remaining.
The numbers: Net profit declined to €1.58 billion from €4.35 billion last year, while revenue slipped slightly to €78.48 billion, and its operating profit margin dropped to 3.6%. The VW brand’s margin shrank further to 2% in the first nine months of the year.
VW said it expects an annual profit of about €18 billion, from sales revenue of about €320 billion.
What they said: “VW is not earning the money it needs to spend for all the new products,” Antlitz told reporters.
“We have not forgotten how to build great cars, but our production costs are far from competitive,” he said. “We stand for free and open markets, if you look at Chinese competitors, they already embarked to set up plants in Europe."
IG Metall union negotiator Thorsten Groeger said: “Volkswagen has opened Pandora’s box by terminating job security and other collective agreements, [it] has jeopardised the trust of its employees and it is now up to Volkswagen to restore this trust.”
The sources: Volkswagen release , Volkswagen presentation , Bloomberg , Reuters
