by Andrey Sychev

(Reuters) – Europe’s largest carmaker Volkswagen said on Wednesday its operating profit fell 42% in the third quarter, weighed down by weak performance in its passenger car division and high costs, and as company shutdowns Factories are taking shape in Germany for the first time in the group’s history.

The automaker plans to close at least three factories in its home country, cutting tens of thousands of jobs as part of a restructuring plan, sparking an open confrontation with unions.

Volkswagen, which is also the largest employer in German industry, also plans to reduce wages by 10% and freeze them in 2025 and 2026, said the president of the works council, Daniella Cavallo, earlier this week. .

The Volkswagen brand’s operating margin fell from 3.4% to 2% in the first nine months of the year.

“This highlights the urgent need for significant cost reductions and efficiency gains,” Arno Antlitz, the group’s chief financial officer, said in a statement.

The European car market has contracted by around 2 million vehicles since the COVID-19 pandemic, which represents around 500,000 fewer units per year for Volkswagen, manufacturers such as the American Tesla and Chinese rivals which offer cheaper models having gained market share in Europe.

In China, Volkswagen’s loss of market share was exacerbated by a slowdown in the Chinese economy due to a real estate crisis.

Volkswagen deliveries to the world’s largest automobile market fell 15% to 711,500 vehicles in the third quarter, bringing the overall figure down to 2.176 million vehicles.

Across the group, operating profit fell to €2.86 billion in the period from July to the end of September, largely in line with the average estimate of €2.80 billion. euros forecast by analysts, according to LSEG data.

Around 08:36 GMT, the stock, which has lost around 20% of its value since the start of the year, advanced 1.73% to 93.95 euros on the Frankfurt Stock Exchange.

A FUTURE FOR ALL GERMAN SITES

The world’s second-largest automaker also suffers from complex governance structures, misjudged investments in electric vehicles, poor management decisions and regulations deemed too strict in Germany.

Unions raised the prospect of strikes on Wednesday unless Volkswagen is prepared to exclude factory closures in its restructuring plan.

Thorsten Groeger, chief negotiator of the powerful IG Metall union, said workers expected a future for all German sites under the restructuring.

“Otherwise, I can say very clearly that we will have to plan for further escalation with our bargaining and collective bargaining committee,” he told reporters.

A second round of negotiations between Volkswagen and the powerful German union IG Metall is expected this Wednesday, after the head of the works council threatened to break off negotiations and launch a strike.

The group cut its annual outlook twice during the quarter, joining rivals BMW and Mercedes-Benz, which are also struggling.

Arno Antlitz, however, declared that the improvement in order intake in Western Europe in the third quarter, thanks in particular to the gradual arrival of new models on the market, was a positive point for the group’s results, giving a boost in the last quarter of 2024.

(Reporting Andrey Sychev, Diana Mandiá, editing by Kate Entringer and Augustin Turpin)

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