The core brand Volkswagen is increasingly becoming the group’s problem child. An austerity program worth ten billion euros should now fix it. But the struggle takes longer than planned.
In view of disappointing results for the core brand VW Passenger Cars, the Volkswagen Group is continuing to push for the savings program that is being discussed.
Details had not yet been finalized in the discussions with the employees, admitted CFO Arno Antlitz on Thursday when presenting the quarterly figures. However, he also saw the need to increase returns as evidenced by the figures for the third quarter.
“If you look at the operating margin in the third quarter alone, that should be a warning signal for us,” Antlitz said in a video interview. “6.2 percent return on sales is not enough to be able to invest decisively in the future.” This applies even more to the core Volkswagen brand. “That’s why we have to improve the situation quickly now.”
Delay in savings program
Brand boss Thomas Schäfer had already announced in the summer that he wanted to reduce costs by ten billion euros with a “performance program”. But the design is taking longer than expected. The package was originally supposed to be in place by the end of October and then passed in November. The group has now moved away from this.
Antlitz doesn’t see this as a problem. “This is a large and very complex program. Quality comes before speed.” After all, it’s about ten billion euros. “A postponement of one or two months shouldn’t worry us.” The program should be in place by the end of the year.
Works council only got involved in October
The design is being negotiated with the works council in several working groups. Works council boss Daniela Cavallo set two clear red lines: There should be no compromises in either the employment security agreed until 2029 or the company tariff.
The company has rejected a report in the “Frankfurter Allgemeine Zeitung” that up to 4,000 administrative jobs could be lost. “There is no general savings target across the administrative area,” it said.
Antlitz left it unclear where exactly the ten billion euros should be achieved instead. But it’s not just about the Volkswagen brand, but about the entire volume group. It is also about improving cooperation with the other brands. “There’s great potential there.”
Partial shortages lead to failures
The reason for the weak performance of the core brand in the past quarter was not least the floods in Slovenia at the beginning of August. Because a supplier of sprockets for combustion engines failed, VW had to reduce production at several locations. As a result, it was not possible to produce 150,000 vehicles, said Antlitz.
“Of course we want to make up for it now,” he added. Starting next week, production will begin normally in all factories. Antlitz put the burden of the bottleneck at a mid-three-digit million euro amount. The core Volkswagen brand was particularly affected. This put an additional strain on the already weak returns.
General conditions are becoming cloudy
The bottom line is that the group made twice as much profit in the third quarter as a year earlier. However, this was mainly due to depreciation worth billions in the same period last year. In the months of July to September of this year, the result after taxes was 4.35 billion euros. In the same quarter of the previous year, the end of a cooperation on software relating to autonomous driving caused a burden of 1.9 billion euros.
At the same time, the general conditions for day-to-day business deteriorated significantly. “As expected, competition has become tougher, the mood on the market is deteriorating. Inflation and interest rates are making the situation even more difficult,” said Antlitz in his video message.
In addition, once the chip shortage ends, all manufacturers will be able to build more cars again. This increases supply and puts pressure on prices. That’s why the planned efficiency programs, which are intended to reduce costs, must now be quickly “finalized and the first measures implemented quickly,” warned Antlitz.
Source: Stern
