Volkswagen, the flagship of the German industry in crisis, announced that it had alarming business results in the third quarter, and the drastic savings plan in preparation seems even more important.
That largest European automobile group recorded a drop in net profit of as much as 63.7 percent in the period from July to the end of September, to 1.58 billion euros in the third quarter, due to high costs and a drop in sales in China, its largest market.
“We have to step up our efforts to remain competitive. And we must act now. Any delay would be irresponsible,” said Arno Antlic, chief financial officer of the group, during the online conference.
Volkswagen is working on the most significant restructuring plan in its history with tens of thousands of jobs at risk. The second negotiating session began on Wednesday with union representatives determined, not shying away from strikes, to prevent the closure of factories in Germany, which would be the first in the group’s 87-year history.
The collapse of Volkswagen “raised Germany to its feet”
Volkswagen is suffering from falling sales, especially in China, where the group generates a third of its sales and where local electric car makers are eating into its market share.
With total sales volume down seven percent in the third quarter, growth in North America (+6.4 percent) failed to offset a significant 15 percent decline in China.
Sales of electric models also fell by 10 percent in the third quarter.
In the first nine months of this year, the group’s net profit fell by 30 percent, and operating profit by 20 percent compared to last year.
Reducing wages by 10 percent more effective than closing factories?
Volkswagen also suffered the impact of “restructuring costs”, particularly due to the impending closure of the Audi plant in Belgium and an increase in fixed costs, the statement said.
Sales of the top-quality Porsche and Audi cars, even the most profitable ones, have declined, while the profitability of the historic VW brand, with its lower prices, is “half-baked”.
“It is urgent to significantly reduce costs and achieve efficiency gains,” Antlic said, as the group announced in September that it was preparing an unprecedented savings plan.
According to the business daily Handelsblat, based on internal documents, only a 10 percent reduction in employee wages would allow the manufacturer to save almost 800 million euros a year, much more than closing factories.
After a period of mandatory social dialogue starting in December, strikes are possible at Germany’s largest industrial employer.
