Volkswagen faces one of the most challenging financial periods in its history, with significant restructuring now seen as crucial.
Deeper Issues
Recently released financial data reveal a steep 42% drop in third-quarter profits compared to last year, despite Volkswagen delivering over six million vehicles, according to Motor.
While the company has generated €13 billion in profit so far this year, Volkswagen’s brand-specific earnings fell sharply from €4.3 billion in 2023 to just €1.6 billion, signaling deeper issues within the German automotive giant.
Volkswagen is responding by considering the closure of three production plants, including the Osnabrück facility, which only produces the T-Roc Cabrio.
Drastic Changes Needed
The company has already reduced staff in administrative departments and opted not to renew temporary contracts in certain factories, leaving the future uncertain for around 140,000 employees.
As part of its cost-cutting measures, Volkswagen is even seeking to lower wages for assembly line workers by 10% while facing union demands for a 7% pay increase, creating a tense labor situation.
One factor behind Volkswagen’s troubles is the high cost of electric vehicle production, coupled with an underperforming software division, Cariad, and rising vehicle prices, which have impacted market share. Furthermore, falling electric vehicle sales and costly production inefficiencies are taking a toll.
The company is now trying to boost sales by focusing on more affordable hybrid models, though this approach may not provide an immediate solution.
With emissions regulations tightening, Volkswagen faces additional financial risks. If drastic changes aren’t made, the company risks penalties that could exacerbate its already precarious position.
