Volkswagen's Profit Drops

By Andrey Sychev
(Reuters) – Volkswagen reported a 42% decline in third-quarter operating profit due to weak performance in its passenger car unit and rising costs associated with model revamps.

After nine months, the operating return on sales in its core unit fell to 2%. Finance chief Arno Antlitz emphasized the necessity for significant cost reductions and efficiency improvements.

A silver lining was seen in the increased order intake in Western Europe during July to September, attributed to new model launches, which may offer support for the final quarter.

Challenges facing Volkswagen, the world's second-largest automaker, include complex governance, poor management decisions, decreasing revenue in China, and Germany's bureaucratic hurdles.

In response, the company has revised its annual outlook downward twice, aligning with issues faced by peers like BMW and Mercedes-Benz. Earnings before interest and taxes for the July-to-September period totaled 2.86 billion euros ($3.09 billion), closely matching estimates.

In early Frankfurt trading, VW shares fell 1.8%. To date, Volkswagen's stock dropped nearly 20%, significantly worse than a 10% fall in the pan-European automotive index.

Tough Talks with Unions

Volkswagen is engaged in tough negotiations with unions concerning a major overhaul that could include plant closures in Germany for the first time in its 87-year history. The IG Metall union is set for a second round of discussions after threatening to halt negotiations and initiate strikes.

The automaker aims to lay off tens of thousands, close three factories, reduce salaries by 10%, and freeze pay in 2025 and 2026. Reports indicate this wage reduction could save nearly 800 million euros ($864 million) annually, forming a significant part of their billion-euro savings strategy.

The works council, dominated by IG Metall, is demanding a 7% wage increase and warned of strikes starting Dec. 1 if their demands are not met.

($1=0.9244 euros)