Europe’s largest automaker, Volkswagen, announced a 64% drop in profits for the third quarter. Net profit fell to 1.57 billion euros, down from 4.34 billion euros a year earlier.
The crisis pushed Volkswagen to implement radical measures. The company asked its employees to take a 10% pay cut. It plans to close its Audi Q8 e-tron plant in Brussels by February 2025, affecting around 3,000 workers. And it is negotiating with unions the closure of up to three factories in Germany, which could affect more than 10,000 workers. This would mark the first national closures in the company’s 87-year history.
The IG Metall union responded with resistance, raising the possibility of strikes if the plant closures proceeded without further talks.
The automaker faces significant challenges from Chinese electric vehicle makers, which are rapidly gaining market share in Europe with affordable models. But a number of other factors contributed to the revenue decline, including restructuring expenses and investment requirements to meet EU electric vehicle regulations. Furthermore, German subsidies for electric consumers, previously a driver of electric vehicle adoption, have been drastically reduced since January, with further cuts planned.
Volkswagen’s sales in Western Europe fell 1%, while sales in China fell 12% for the year to September.
Arno Antlitz, Volkswagen’s chief financial officer, pointed out that the company’s slim operating margin of 2% in its core VW brand underlines the urgency of “significant cost reductions and efficiency gains.”
Although German officials, including Chancellor Olaf Scholz, have refrained from committing to financial aid, they have emphasized close monitoring and constant dialogue with Volkswagen management and unions.