12:44 pm, October 31, 2024
Volkswagen has asked its workers to take a 10% pay cut after its lowest third quarter earnings since the Covid pandemic and a 15% drop in sales in China, which has traditionally been one of the brand’s biggest markets.
The company’s profits fell by 42% in the quarter and overall revenues dropped by 64%, sending its share price tail-spinning to a 24-year low, despite it returning a $12.9bn (£9.9bn) profit.
The company’s chief financial officer, Arno Antlitz, said: ‘This highlights the urgent need for significant cost reductions and efficiency gains. Employees are worried about their future – we are facing essential and painful decisions.’
Among Volkswagen’s plans to cut costs are a 10% pay cut for its workforce, though it hasn’t yet announced plans to close any factories.
It was the first official confirmation of cost-cutting measures from VW, which has told unions that high costs and reduced demand in China have left the company exposed.
VW also said it was concerned about a possible Chinese reaction to EU tariffs – a standoff between the two markets would leave it exposed, as Volkswagen sells more cars in China than any other European brand.
‘We urgently need a reduction in labour costs in order to maintain our competitiveness [and] this requires a contribution from the workforce,’ said Arne Meiswinkel, VW’s HR boss.
But union representatives have accused management of poor decisions and have threatened strikes from December unless the company definitively ruled out plant closures.
‘From the company’s point of view, plant closures are still on the table, i.e. they have not been completely ruled out,’ said Volkswagen Works Council chief Daniela Cavallo.
VW has said it cannot rule out strikes, with the company considering more than 10 billion euros in cost cuts, as well as a comeback plan for China with increased driving assistance and better software, expecting to regain market share from 2026 or 2027.
The company also needs to address a European market that has contracted by around two million units since 2019 and faces increased competition from new brands, mostly from China.
‘We have not forgotten how to build great cars, but our production costs are far from competitive,’ said Arno Anlitz. ‘We should really use time to increase our competitiveness on German plants.’
Unions and management will hold further talks in December.
