November 2, 2024: Germany’s biggest carmaker, Volkswagen, announced this week, ‘the urgent need’ to close factories for the first time in its 87-year history, just days before posting a third quarter crash of 64% in profits.
As the crisis in German industry deepens, the bleak results come as the carmaker — parent company of Volkswagen, Audi and Porsche — faces an extended battle with unions representing 120,000 employees over plans to shut three factories in Germany serving its main VW brand in the home market and cutting staff pay.
VW remains profitable but earnings are down from €5.8bn a year earlier. The company said sales in China over the first nine months of 2024 were down 12% with western European sales falling 1% over the same period.
Arno Antlitz, VW’s chief financial officer, said the results “reflect a challenging market environment and underline the importance of delivering on the performance programmes we have launched across the group”.
He said: “Volkswagen brand reported an operating margin of only 2% after nine months. This highlights the urgent need for significant cost reductions and efficiency gains.”
Volkswagen also released a statement on Wednesday from its chief negotiator, Arne Meiswinkel, who said “the situation is getting worse”, before talks with unions.
He also highlighted the low profit margin for the VW brand. “This is not enough to be able to invest in our future,” he said. “Only those who do business successfully can offer secure jobs. We must increase our efficiency and reduce costs.”
Carmakers around the world are struggling as growth in sales of EVs has slowed while producers in China are trying to win market share. There has also been sluggish uptake for new vehicles as higher interest rates take their toll, while several firms — including VW’s German rivals BMW and Mercedes-Benz — have reported that demand in China in particular has dropped.
The British sportscar brand Aston Martin also confirmed this week that the “weak macroeconomic environment in China” was holding it back.
The bleak financial picture highlights the hurdles Germany’s flagship automaker faces as it struggles to remain competitive in the transition to EVs, not helped by an economic downturn at home leading to lower demand as consumers pull back on big expenditure.
Germany’s chancellor, Olaf Scholz, held an emergency summit earlier this week calling on VW not to lay off workers, saying: “Possible wrong management decisions from the past must not be at the expense of employees.”
But Bavaria’s premier and leader of the conservative Christian Social Union, Markus Söder put the blame on green policies followed by Sholz’s governments and the EU — specifically the 2035 phaseout of the sale of new combustion engine cars and next year’s lower pollution limits that the industry claims will cost them billions in fines.
“The development at VW is brutal for Germany as a car location,” he said.
