Volkswagen Emphasizes Immediate Cost Cuts Amid Steep Decline in Earnings
BERLIN—Volkswagen emphasized the need for significant cost reductions as it announced a sharp decline in third-quarter earnings on Wednesday, sparking concern among employee representatives over potential plant closures in Germany.
In the July-September period, the company reported a net profit of 1.58 billion euros ($1.7 billion), down 64 percent from the previous year’s 4.35 billion euros. Revenue only slightly decreased by 0.5 percent to 78.49 billion euros.
Just days after Volkswagen’s works council head mentioned management’s intention to shut down at least three German plants, the company revealed the financial results. Specific details of the closure plans have not yet been disclosed publicly.
In early September, Volkswagen acknowledged the possibility of plant closures in Germany due to challenges in the auto industry, leading to the reconsideration of job security established in 1994, which prevented layoffs until 2029.
Factors such as the entry of new rivals into European markets and the declining manufacturing environment in economically stagnant Germany are cited as reasons for this decision. European automakers face growing competition from low-cost Chinese electric vehicles.
Chief financial officer Arno Antlitz highlighted the need for immediate action given the competitive and volatile market environment. He stressed the importance of making difficult decisions collectively to navigate through these challenges.
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“We haven’t lost our ability to manufacture exceptional cars, but the costs, especially in our German operations and factories, are not competitive,” Antlitz added. “That’s why we need to make changes to the current situation.”
Antlitz refrained from commenting on specific plans or rumors due to the ongoing discussions with employee and union representatives, emphasizing the confidential nature of their talks.
A follow-up meeting was held on Wednesday at Volkswagen’s Wolfsburg headquarters to further discuss the matter.
Thorsten Gröger, the regional leader of the IG Metall industrial union, insisted that Volkswagen must be willing to engage in negotiations with the aim of finding alternatives to plant closures and job cuts. With the expiration of the no-strike agreement on December 1, he stressed the urgency of the situation.
Following the talks, Gröger expressed relief that negotiations did not collapse immediately. However, he found demands like a 10% salary reduction unacceptable and awaited commitments from senior management and shareholders to contribute to cost savings.
Daniela Cavallo, the head of the employee council, echoed the sentiment, emphasizing the need for collaboration in developing a comprehensive plan for the future that eliminates the possibility of plant closures and layoffs.
Volkswagen currently employs around 120,000 people in Germany, operating 10 plants, with six located in Lower Saxony, including Wolfsburg.
