Dive Brief:
- Volkswagen Group is targeting a “comprehensive cost program” totaling around 31 billion euros, or approximately $34 billion, as it faces rising macroeconomic challenges, executives said Thursday during the company’s earnings call.
- China’s market is “contracting sharply, driving further export growth into other regions,” CFO and Chief Operating Officer Arno Antlitz said during the earnings report for the automaker’s first nine months of 2026. The Germany-based Volkswagen Group owns and operates 10 auto brands, including Porsche, Audi and Lamborghini.
- “Tariffs, geopolitical tensions and unprecedented competition add to the pressure. Europe's shift from combustion engines to electric vehicles has accelerated,” he said, adding “all these factors weigh on our volumes, mix, and margins.”
Dive Insight:
During the Thursday earnings call, Antlitz stressed the need for swift and immediate restructuring by the German automaker, which is facing rising competitive pressures in key markets such as Europe, challenges from U.S. tariffs and a shrinking market share in China.
The automaker’s nine month results “leave no room for delay” in implementing the plan, Antlitz said during the call. Antlitz, who has more than two decades of experience with Volkswagen and its assorted brands, took on the CFO role in 2021 and added the COO role to his remit in 2022, according to his LinkedIn profile.
The company aims to reduce both vehicle, overhead and operational costs, as well as to boost profitability, he said. Of the $34 billion planned reduction, Volkswagen is seeking to reduce about $12 billion in overhead costs, while the remaining will be related to operational expenses, Antlitz said Thursday in response to analyst questions.
While the largest cost improvement should be related to overhead costs, “it should not be linear,” he said. “We need a step down in 2027, both in terms of headcount and ideally also in terms of labor costs.”
“Intensifying global pricing” and competitive pressure dampened automotive sales for the nine month period, with global vehicle sales of approximately 6 million declining 11% compared to the prior year period, according to the company’s earnings result. The slump was primarily driven by falling demand in China, where delivery volumes declined 30% amid “weak consumer sentiment,” Antlitz said.
Meanwhile, deliveries in Europe rose by 1.7% due to growing demand for battery electric vehicles — BEVs accounted for 20% of deliveries in the market, up from 18% in the year earlier period, he said.
However, rising EV demand in Europe only partially offset pressures coming from the U.S. and China, leaving overall EV global delivery to slump 5.4% YoY, Antlitz said. Moreover, “the market success of our electric vehicles is putting additional pressure on our earnings, as we currently earn less from electric vehicles than from combustion-engine vehicles,” Antlitz said in a statement included in the earnings report.
The automaker also reported a widening operating loss for its third quarter ending Sept. 30 to $6.4 billion, while operating income for the nine month period fell by 98% from the prior year period, according to its earnings report. Its operating profit margin of 3.8%, meanwhile, is “too low to continue investing strongly in our future,” and shows a clear need for action, Antlitz said.
“We must accelerate and broaden our efforts to structurally lower our cost base,” he said during the call. “This is essential to earn adequate returns and deliver on our financial ambitions. For this, we need lasting structural improvements across the group.”
The renewed calls for swift restructuring come as the business has made repeated efforts to reduce costs over the past year, including reductions in its global headcount and outlining plans to slash its vehicle model portfolio.
Volkswagen’s supervisory board in September announced an update to its “Future Plan 2030” initiative, which detailed efforts to trim its model portfolio by 50% and to assess its investment portfolio with an eye to ensuring the company is deploying capital only to areas “with a clear strategic and financial contribution to the core business,” according to the Sept. 3 release.
The company in September also announced it would further reduce its global workforce by approximately 50,000, including management positions — following a previous 50,000 workforce reduction Volkswagen announced in March, according to reports at the time.
The planned reductions have sparked protests from union leaders in Germany, who have called for strikes as the layoffs threaten long-standing labor standards in the country, such as holiday pay and working hours, up for renegotiation, according to an Oct. 23 Reuters report. The cuts could also see the closure of up to four manufacturing plants in Germany, Reuters reported.
