Volkswagen’s profit falls disastrously. The German state is preparing to intervene
Volkswagen reported a 60% drop in profits due to slumping sales in China and underlined the difficulties it faces as it prepares to close factories in Germany for the first time.
Germany's largest automaker has told workers it is considering closing three plants serving its main Volkswagen brand in the home market and cutting staff salaries, raising the prospect of a long battle with unions representing 120,000 German employees.
Automakers around the world are struggling with limping demand for new vehicles due to rising interest rates, while many, including VW's German rivals BMW and Mercedes-Benz, have reported a drop in demand especially in China. British sports car brand Aston Martin also confirmed on Wednesday that the “weak macroeconomic environment in China” was dragging it back.
More mature manufacturers also face significant investment to switch from petrol and diesel production to electric, but growth in battery electric car sales has slowed in some key markets. At the same time, new Chinese electric car makers are trying to gain market share.
Volkswagen Buzz
VW remains profitable, but pre-tax profits fell nearly 60% to 2.4 billion euros in the July to September quarter, compared with 5.8 billion euros a year earlier.
The company said sales in China in the first nine months of 2024 fell 12%. Sales in Western Europe fell 1% over the same period.
Arno Antlitz, VW's chief financial officer, said the results "reflect a challenging market environment" and added that they "underline the importance of delivering on the performance programs we have launched across the group."
He stated that: “The Volkswagen brand recorded an operating margin of just 2% after nine months. This highlights the urgent need to significantly reduce costs and increase efficiency.”
Volkswagen also released a statement on Wednesday from its chief negotiator, Arne Meiswinkel, who said “the situation is getting worse,” ahead of talks with unions. He also highlighted the VW brand's low profit margin.
“It's not enough to be able to invest in our future,” he said. “Only those who do business successfully can offer safe jobs. We need to increase our efficiency and reduce costs."
The company's EV sales fell 4.7% from a year earlier, due to "buyer reluctance." However, much of the decline was driven by Germany, which cut subsidies for electric vehicles earlier this year.
The value of the stock fell, but then rebounded, also because the suboptimal performance was already known.
Now we're talking about public aid
There is now open talk of public aid to the car manufacturer, after the government stopped subsidizing electric cars at the end of 2024. A confidential summit was held between the Chancellor and representatives of the industrial sector to discuss the crisis in the car sector .
The Chancellor uttered only a few subtle sentences: “Germany is a strong country that currently faces great challenges,” said Olaf Scholz . Now it's a matter of "working together and strengthening the territory with a pact for the sector that includes very concrete measures". Generic and political words, which do not allow us to understand the real value.
The next conversation between the Chancellor and the industry is scheduled for 15 November.
The Chancellor has not yet revealed what measures he has in mind to support the struggling car industry. No concrete proposals were made at Tuesday's summit either, the participants later reported. But the government will have to do something, especially since there is only one element left until the elections.
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The article Volkswagen's profit collapses disastrously. The German state is preparing to intervene comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/lutile-volkswagen-crolla-disastrosamente-lo-stato-tedesco-si-prepara-a-intervenire/ on Wed, 30 Oct 2024 19:40:47 +0000.