Volkswagen reported a 64% drop in third-quarter profits, with after-tax earnings sinking to €1.58 billion and core brand profitability barely breaking even. Against this backdrop, the automaker and German union IG Metall have resumed negotiations over the company’s collective labor agreement, where Volkswagen’s Chief Financial Officer, Arno Antlitz, has signaled the need for “billions in savings.”
Volkswagen is navigating what Antlitz recently described as a “serious” phase. “I am aware that the cuts being discussed at Volkswagen AG are tough,” he said, referring to cost-reduction measures, including restructuring costs amounting to €2.2 billion, largely due to severance payments. “But it is our joint responsibility to lead Volkswagen into a good and secure future,” Antlitz added, emphasizing the need to position the brand competitively.
One of the measures involves closing the Audi plant in Brussels by the end of February 2024, with speculation over further closures among its larger plants. These closures reflect Volkswagen’s struggle to maintain a stronghold in the European and Chinese markets, where heightened competition has driven down market shares for German automakers. Antlitz said he expects the European market to remain below pre-pandemic levels, estimating a long-term annual ceiling of around 14 million vehicles, about two million fewer than before COVID-19.
IG Metall Warns of Possible Strikes Amid Dispute Over Cost-Cutting
The labor union IG Metall, representing around 120,000 Volkswagen employees across six plants in western Germany, has drawn a firm line in the ongoing negotiations, demanding a “viable future concept for all sites.” IG Metall’s lead negotiator Thorsten Gröger cautioned that failing to meet this requirement could result in “further escalation,” hinting at the possibility of strikes as early as December. Gröger underscored that “further escalation” could ensue if Volkswagen insists on plant closures and deep workforce reductions.
While Volkswagen works to address its financial challenges, including a reported negative cash flow of €1 billion from the core brand in Q3, IG Metall remains firm in its opposition to plant closures. The union maintains that any savings plan must avoid significant job losses and keep sites operational.
Demand for EVs Rises, Offering Relief for Volkswagen’s Future Prospects
Despite the financial strain, Volkswagen’s order book for electric vehicles (EVs) has shown promise, with nearly double the orders, reaching 170,000 vehicles. Demand for plug-in hybrids, such as the Passat and Tiguan, has also increased, which Antlitz said brings the automaker closer to meeting its 2025 CO2 targets. This progress would enable Volkswagen to sidestep costs associated with EU emissions penalties or purchasing carbon credits.
Ultimately, the future of Volkswagen’s financial and operational strategies rests on reaching a balance between significant cost-cutting and maintaining its workforce. “We must position the brand competitively for the future and future generations,” Antlitz emphasized, while IG Metall pushes for solutions that ensure stability across all sites.
