Volkswagen under Pressure: Profit Slump and Challenges in the Home Market

Volkswagen is facing significant challenges after operating profit dropped by 42% in the third quarter. This is attributed to weak performance in the core passenger car business and high costs due to model revisions. After nine months, the operating margin in the core business fell to a modest 2%, which, according to CFO Arno Antlitz, underscores the urgent need for substantial cost reductions and efficiency improvements. The issues stem from complex governance structures, misguided investments in electric vehicles, weak management decisions, declining sales in China, and crippling bureaucracy in Germany. The largest car manufacturer in Europe has already had to lower its annual forecast twice, similar to competitors BMW and Mercedes-Benz, who are also facing challenges. Tensions are high with the unions after Volkswagen announced restructuring plans that, for the first time in the company’s 87-year history, could involve potential plant closures in Germany. Continuation of negotiations with the strong German union IG Metall is set for Wednesday, following threats from the works council chairman to break off talks and strike. Earnings before interest and taxes (EBIT) fell to 2.86 billion euros in the period from July to September, nearly meeting the average analyst estimate of 2.80 billion euros.