Volkswagen profits plunge by 64 percent as Daimler Truck reviews China operation

 

Admin I Thursday, October 31, 2024

 

SAXONY – The crisis-ridden Volkswagen Group has suffered a severe slump in profits in the third quarter, the company reported on Wednesday. A weak industrial environment with fewer vehicle sales, as well as Volkswagen’s efforts to reduce capacity by downsizing plants and cutting jobs, resulted in a billion-euro burden on earnings.

The figures were weaker than analysts had already feared. Group profit after tax fell by 64% to €1.58 billion ($1.71 billion) – partly because VW is also doing badly in the important Chinese market.

Turnover, on the other hand, fell by only 0.5% to €78.5 billion.

In addition to the VW brand, the Volkswagen Group includes a number of other carmakers such as Porsche, Audi, Seat and Škoda as well as commercial vehicle brands such as MAN and Scania. The management led by VW chief executive Oliver Blume maintained the annual forecast, which was lowered again in September.

Blume has sought to reduce bureaucracy within the major carmaker and hopes to cut billions in costs in order to get the low-profit core brand VW Passenger Cars back on track.

According to the works council at Volkswagen, company management plans to close at least three VW plants in Germany and downsize the rest, with planned mass layoffs affecting tens of thousands of workers. Significant across-the-board pay cuts are also on the cards.

VW labour leaders have announced plans for fierce resistance to the cuts and are demanding a more comprehensive approach than just focusing on labour and factory costs.

This Wednesday, company management plans to sit down for collective bargaining talks with the IG Metall trade union, which represents most German factory workers at VW.

Meanwhile, Daimler Truck has announced it is reassessing the future of its operations in China.

As discussions continue, the company recorded a one-time, non-cash valuation adjustment of €180 million ($195 million) for receivables in the third quarter.

The adjustment does not affect Daimler Truck’s operational performance—adjusted earnings before interest and taxes (EBIT) and adjusted return on sales (ROS).

The company noted that all other preliminary and unaudited third-quarter key performance indicators (KPIs) are not subject to ad hoc disclosure and will be released along with the full third-quarter results on November 7.