Volkswagen’s profits drop by 64% due to declining sales in China.

Volkswagen is emphasizing the urgent necessity to implement significant plant closures and job reductions after reporting a 64 percent decrease in quarterly net profit due to poor sales in China and restructuring costs. The company disclosed plans to shut down three plants and lay off tens of thousands of employees, marking its most drastic restructuring move in its nearly 90-year history. The CFO, Arno Antlitz, stated that they must intensify their efforts to stay competitive, citing overcapacity in Europe. Net profit for the third quarter decreased to €1.57 billion from €4.34 billion a year ago, with revenue also dropping by 0.5 percent to €78.5 billion. The operating profit margin fell to 3.6 percent from 6.2 percent during the quarter. The operating margin for the VW brand decreased to 2 percent in the first nine months of the year, further from the 6.5 percent target set for 2026 by the CEO.

Wage negotiations with unions demanding a 7 percent pay raise for employees were ongoing following the release of the company’s results. Management proposed a 10 percent pay cut for VW brand workers as part of the restructuring measures, which were met with criticism from the works council boss. The government, including Chancellor Olaf Scholz, is closely monitoring the situation and has not ruled out potential support for the company.

VW has issued two profit warnings this year due to declining sales of electric vehicles in Germany and a 12 percent drop in vehicle sales in China. The company expects an operating profit of around €18 billion for the full year, representing a profit margin of approximately 5.6 percent. Despite the challenges, VW’s underlying margin was higher than expected at 5.2 percent after accounting for restructuring charges related to the closure of an Audi plant.

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Other carmakers, such as Porsche and Mercedes-Benz, are also facing pressures in the market, with Porsche reporting a 41 percent drop in profits and Mercedes-Benz pledging to accelerate cost-cutting measures. Despite the challenges, VW’s shares were up nearly 2 percent in mid-morning trading.