Volkswagen Faces Sharp Profit Drop and Expands Job Cuts Amid Chinese Competition

Volkswagen’s operating profit fell 9.5% to €3.5 billion in the second quarter, missing analysts’ expectations of a modest rise to €3.9 billion. The automaker cut its sales-revenue forecast to a decline of up to 3% for the year, reversing a prior projection of 3% growth on last year’s €321.9 billion total. After the results were released, the company’s share price slipped 1.5% and is now down 66% over the past five years.

The Guardian

The cost-cutting plan now targets up to 100,000 job cuts—double the 50,000 already agreed with unions—and will focus mainly on administrative positions across Volkswagen’s global operations. The programme also calls for reducing the model line by up to half. Volkswagen’s supervisory board rejected CEO Oliver Blume’s proposal to shut four factories in Germany, underscoring internal resistance to the restructuring.

The Guardian

In the first half of the year, Volkswagen’s sales in China fell by more than 31%, driving a 6.3% global delivery decline to about 4.1 million vehicles. The slump reflects intensified pressure from Chinese manufacturers that have sharply increased exports, squeezing western carmakers in the Chinese market and adding competitive strain in Europe. The broader challenge includes cheap Chinese competition and the ongoing transition to electric vehicles.

The Guardian

• “The extent to which western carmakers are being squeezed out of the Chinese car market by domestic operators is laid bare by Volkswagen’s latest update,” — Russ Mould, the investment director at AJ Bell

The Guardian

• “After nearly four years at the wheel as chief executive, Oliver Blume is likely to come under increasing pressure,” — Russ Mould, the investment director at AJ Bell

The Guardian