The German automobile giant Volkswagen said on Friday it wanted to accelerate its cost reduction efforts to regain profitability, which has further deteriorated in recent months, while a new savings plan casts doubt on factory closures in Germany.
In the second quarter, the net profit of the Wolfsburg group (north) reached 1.54 billion euros, down 32.9% year-on-year, according to financial results published Friday by the company.
“These results are an alarm signal” encouraging “action”, insisted the group’s financial director, Arno Antlitz, during a press conference.
In addition to the already known elimination of 50,000 positions in its German entities by 2030, Volkswagen would like to eliminate another 50,000 jobs, mainly in the group’s administrative services on a global scale.
This would bring the total number of jobs lost to 100,000, a prospect which had already angered the powerful IG Metall union in Germany in early July.
“Last solution”
Asked at a press conference about the feared hypothesis across the Rhine of the closure of factories, the chairman of the management board of Volkswagen, Oliver Blume, wanted to reassure on Friday by affirming that it was “not realistic to talk about closures by the end of the decade”, leaving a question mark from 2030.
“Closing a factory is always the last solution,” he stressed.
In the second quarter, the group’s profits were weighed down in particular by an exceptional charge of half a billion euros linked to the cessation of production of the ID.4 electric SUV in the United States.
Volkswagen also experienced “negative mix effects,” selling proportionately fewer high-margin vehicles, which weighed on its profitability.
But beyond these one-off effects, Chinese manufacturers still exerted strong pressure on the group’s deliveries, which plunged by 36.6% in China in the second quarter.
“Chinese competitors not only export their vehicles to Europe, they also export competitive pressure there,” explained Mr. Antlitz.
Groups like BYD or XPeng are eating up more and more market share on the Old Continent every month, by managing to market very technologically advanced vehicles in the electric segment, at affordable prices.
Building on its “In China for China” strategy, Volkswagen wants to catch up with vehicles specifically adapted to the expectations of Chinese consumers, rather than adapting models originally designed for the European market.
The group wants to launch more than 30 models by the end of 2027 in a market which welcomed 500 new ones in the first half alone, according to Mr. Blume.
Weight loss cure
More broadly, the chairman of the board estimated in front of analysts and journalists that “the measures which were adequate in the past do not [l’étaient] more to reach [leurs] goals “.
The manufacturer detailed an action plan on Friday, called “Group Target Picture 2030”, which involves drastic reduction in costs, reduction in production capacity and simplification of the offer, with the hope of regaining competitiveness.
The slimming treatment of the giant with ten brands (VW, Skoda, Audi, Seat, Porsche, etc.) also involves international production capacities, which must be reduced to 9 million units compared to 12 million before the Covid19 pandemic.
The group finally wants to simplify its offering, by reducing its model portfolio by half and the number of equipment options offered by 75%.
Faced with headwinds, Volkswagen has lowered its turnover forecast for 2026. It is now targeting between -3 and 0%, instead of the 0 to +3% initially forecast.
However, it maintained its objective of an operating margin, a key indicator of profitability, of between 4 and 5.5%. In the first half, it amounted to 3.8%.
With its strategy, Volkswagen wants to achieve an operating margin of between 8 and 10% by 2030.
Despite the drop in profits, the net cash flow of its automotive division jumped by 4.5 billion euros in the first half compared to the negative balance over the same period last year, a sign of the company’s intact capacity to finance heavy investments.
Volkswagen also saw improvements in the European market, where its order book for electric vehicles increased by more than half year-on-year.
