Volkswagen Profit Falls 10% as Automaker Weighs Major Global Job Cuts
Volkswagen reported a sharp decline in second-quarter earnings as the German automotive giant moves ahead with a sweeping restructuring plan aimed at strengthening its position against growing competition from Chinese electric vehicle manufacturers.
The company posted an operating profit of €3.5 billion ($4 billion) for the three months ending in June, representing a decline of nearly 10% compared to the same period last year.
Volkswagen also lowered its financial outlook for the year, revising its revenue forecast from expected growth of up to 3% to a possible decline of as much as 3%.
Chief Executive Officer Oliver Blume attributed the weaker performance to mounting pressures across the global automotive industry.
“The environment for the automotive industry remains extremely challenging: geopolitical crises, trade conflicts, high regulatory requirements, volatile markets and intensified competition,” Blume said.
The automaker’s shares have fallen by more than 30% over the past year and were down almost 2% during early afternoon trading on Friday.
Volkswagen, which also owns brands including Audi and Skoda, is implementing a broad cost-cutting programme as it seeks to respond to fierce competition from Chinese electric vehicle makers and the impact of higher tariffs on exports to the United States.
In a memo circulated to employees earlier this month, Blume described the initiative as “the most comprehensive realignment in the company’s history.” He also revealed that US tariffs are costing the company up to €5 billion ($5.7 billion) annually.
As part of the restructuring, Volkswagen is considering significant workforce reductions. The company, which employs approximately 650,000 people worldwide, had previously announced plans to eliminate 50,000 jobs in Germany by 2030.
Blume disclosed that management is now evaluating an additional 50,000 job cuts globally, alongside the possible closure of four factories in Germany.
“The headcount across the (firm) has grown over the decades to a scale that is no longer sustainable today,” he wrote.
The proposed measures have drawn strong opposition from IG Metall, Germany’s largest labour union, which argues that further job cuts would violate a 2024 agreement that ruled out compulsory redundancies and factory closures.
Jan Mentrup, the union’s spokesperson for Volkswagen employees, criticised the company’s handling of the situation.
“Tens of thousands of employees are learning about their own threatened future from newspaper reports, while inside the company no one has told them,” Mentrup said.
Industry analysts believe Volkswagen will need to make substantial structural changes to remain competitive as Chinese electric vehicle manufacturers continue to expand globally.
Mark Hogan, a senior analyst at GlobalData, said Chinese automakers benefit not only from lower labour costs but also from their ability to develop and launch new electric vehicles at a much faster pace than established manufacturers.
“It’s a very volatile time and there’s no such thing as too big to fail anymore,” Hogan said.
