Volkswagen Faces Financial Struggles: Profit Warning and Factory Closures Ahead
Volkswagen, the renowned German automaker, has issued a grim profit warning for 2024, shedding light on the financial challenges it faces. According to the company's interim report for the third quarter, Volkswagen achieved a meager operating margin of just 2 percent during the first nine months of the year. In a call to action, Chief Financial Officer Arno Antlitz emphasized the need for urgent measures, stating the necessity for significant cost reductions and efficiency improvements.
In a recent meeting with employee organizations, Antlitz disclosed that the company plans to close at least three factories in Germany, resulting in thousands of layoffs and a push to reduce wages. The alarming financial indicators reflect the escalating costs of energy, raw materials, and personnel that have burdened the automaker. Thomas Schäfer, head of Volkswagen's passenger car division, noted that operating costs in German factories are now double compared to their competitors.
The company's performance took a hit in the third quarter, with aftertax profit plummeting by 64 percent to just 16 billion euros, a sharp decline from 44 billion euros in the previous year. This downturn was notably below the anticipated figure of 31 billion euros, as estimated by SP Global Market Intelligence.
Volkswagen has identified multiple factors contributing to its reduced profitability, including restructuring costs amounting to 22 billion euros, higher fixed costs, and expenses associated with launching new products. However, amidst the turmoil, there was a glimmer of hope; the company's revenue in the third quarter reached 785 billion euros, surpassing expectations that had set the bar at 758 billion euros. Additionally, a noticeable bounce in orders in Western Europe during the third quarter offers some optimism as the automaker heads into the fourth quarter.
As Volkswagen grapples with these challenges, it is clear that decisive actions are necessary to steer the company back to profitability and ensure its competitive edge in a rapidly evolving automotive market.
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