Volkswagen said on Friday that it currently expects an operating margin of 5.6 percent. This means a decrease compared to the previous forecast. In July, when Volkswagen revised its profit expectations for the first time, margin forecasts were at 7 percent. Then VW lowered its forecasts, partially due to the expected costs of closing the Audi factory in Belgium. Now the company has other headwinds on the horizon. VW will conduct negotiations with trade unions regarding possible job cuts (probably by 15,000) and unprecedented plant closures in Germany.
The warning underscores the scale of the crisis at Volkswagen, which has bungled its transition to electric vehicles and fallen into irrelevance in China, where its VW, Audi and Porsche brands are losing market share.
Volkswagen Car Sales / Bloomberg
VW’s net cash flow will be halved
Net cash flow for the automotive division is now expected to be less than half of what the company had previously forecast. VW currently expects net cash flow in the automotive division of approximately EUR 2 billiondown from €4.5 billion previously.
The downgrade in Volkswagen’s outlook increases challenges for CEO Oliver Blume, who has warned that costs in Germany are too highas the popularity of electric vehicles slows, and additionally Chinese manufacturers, led by BYD, are entering Europe with a cheaper offer of electric vehicles.
Volkswagen said its passenger car brand and commercial vehicle unit were performing below expectations. He also signaled additional risks for his car manufacturing group, which also owns them Skoda and Seat.
The company’s global shipments will fall to about 9 million units this year from 9.24 million in 2023, VW said on Friday. The carmaker previously forecast growth of 3 percent.
Volkswagen, Mercedes-Benz and BMW are in trouble
All three major German carmakers – Volkswagen, Mercedes-Benz and BMW – have already warned this month that their profits will be much weaker than expected.
Earlier this month BMW has warned that its profits in 2024 will be much lower than a year ago. The company estimates that the operating margin of car production will be just 6 percent, compared to the previous low of 8 percent. In BMW’s case, the reason for the problems was a faulty braking system from supplier Continental, which forced BMW to recall for service and suspend deliveries for a total of about 1.5 million vehicles.
Mercedes-Benz followed in the footsteps of local competitors and revised margin expectations to 7.5 percent. to 8.5 percent, compared to the previous forecast of up to 11 percent. The condition of Mercedes was most affected by the deepening sale in China, which harmed its sales the most expensive models, such as the S-class and Maybach sedans.
