Volkswagen, the German automotive giant, announced a 42% decline in third-quarter operating profit on Wednesday, citing high costs and restructuring efforts as key pressures. Operating profit for the quarter dropped to €2.86 billion ($3.1 billion), while sales revenue declined slightly by 0.5% to €78.5 billion compared to the same period last year. Vehicle sales also fell by 8.3% year-over-year, the company reported.
Liquidity Challenges and Profit Decline
Volkswagen’s net liquidity was negative €160.6 billion at the end of September 2024, a further drop from negative €147.4 billion at the close of 2023. For the first three quarters of the year, the automaker’s operating profit saw a 21% year-over-year decrease, impacted heavily by increased fixed costs and ongoing restructuring.
Arno Antlitz, Volkswagen Group’s CFO and COO, highlighted the “challenging market environment” as a major contributor to the weaker financial performance and emphasized the importance of the company’s ongoing performance improvement programs.
Revised Outlook and Labor Tensions
The automaker recently lowered its 2024 profit margin outlook to around 5.6% and projected a slight sales decline to €320 billion, projections it maintained in its latest update. The company has faced substantial operational challenges, including the possibility of plant closures in Germany and the suspension of various labor agreements. Additionally, in September, Volkswagen announced the end of a longstanding employment protection agreement for its German workforce, originally set in place in 1994.
Upcoming Cost-Cutting Plans
Volkswagen’s works council reported on Monday that the company’s management is considering widespread pay cuts, layoffs, and potential downsizing of its German plants. The company reiterated the necessity of these restructuring measures and has announced it will present detailed cost-cutting plans in ongoing negotiations with labor representatives.
