Volkswagen reported a 9.5% drop in second-quarter operating profit and now expects sales to fall by up to 3% this year, reversing an earlier growth forecast. A slump in China is driving the reversal and adding pressure to a cost-cutting plan that targets 100,000 job cuts.
Volkswagen's operating profit fell 9.5% to €3.5bn in the second quarter, below analysts' estimates of a small increase to €3.9bn. The world's second-largest carmaker also lowered its revenue guidance and now expects sales to fall by up to 3% this year, reversing an earlier forecast for a 3% increase on last year's €321.9bn (£275.3bn).
China drags down deliveries
The reversal traces back to China, where Volkswagen's sales have fallen by more than 31% in the first half of the year, against increases in Europe and North America. Globally, the group delivered 6.3% fewer cars, about 4.1m, mostly because of its troubles in that market.
Cheap Chinese competition and the struggle to shift to electric cars have weighed on the company. Blume said Chinese carmakers had sharply increased exports, which was adding pressure in Europe.
Cost cuts target 100,000 jobs
As a result, pressure to cut costs is mounting. Earlier this month the supervisory board rejected Blume's plan to shut four factories in Germany. At the same time, the manufacturer raised its job cuts target to 100,000, double the number already agreed by unions.
Those additional cuts would fall mostly on administrative positions across the global business, the company said on Friday. The plans also include reducing the model line by up to half. Blume called the restructuring essential to making Volkswagen "more innovative, faster, more attractive and robust".
Shares slide as rivals feel the strain
Volkswagen's share price fell 1.5% after the results, and is down 66% over the past five years. Russ Mould, investment director at AJ Bell, said Blume is likely to come under increasing pressure after nearly four years as chief executive.
The strain is not Volkswagen's alone. BMW last month cut its profit guidance because of disruption from the Iran war and its own difficulties in China.
Source: The Guardian
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