Continuing to reduce costs. On the occasion of the presentation of its financial results for the first half of the year on Thursday, the German group Volkswagen confirmed its commitment to reduce its costs for the rest of the year in order to improve its finances.
“We are reducing all costs”
The manufacturer with ten brands will have to make “considerable efforts in terms of costs during the second half of the year,” said its financial director Arno Antlitz during a press conference.
“We are reducing factory costs across the board with increased productivity, but also supply chain costs and labour costs,” said Oliver Blume.
The executive mentioned the “continuation of early retirement plans, the hiring freeze and the severance pay programme”. Punished by its low profitability compared to its competitors, the leading European manufacturer launched a “transformation” plan last year aimed at saving 10 billion euros and achieving an operating margin of between 9 and 11% by 2030.
An operating margin “still too low”
In fact, the results released this morning seem contradictory. Volkswagen posted a net profit of 3.63 billion euros between April and June, down 4.2% year-on-year, due to a drop in vehicle sales and an increase in costs.
Its operating margin of 6.3% is “still too low” compared to its expectations, added Arno Antlitz.
The group’s turnover, at 83.3 billion euros, increased by 4.1% over the year thanks to the “strong commercial development” of its financial services activity, the press release said.
But the automotive business suffered a drop in vehicle sales. From April to June, Volkswagen delivered 2.2 million vehicles worldwide, 3.8% less than in the same period in 2023. Sales of its Porsche and Audi sports cars, which allow the best margins, fell by 9.6% and 11.3% respectively.
Growth in North America (+8%) and South America (+15%) also failed to fully offset the 19% drop in sales in China, its main market, where it achieved almost a third of its sales.
This was compounded by non-operating factors, “in particular unforeseen provisions for the severance programme”, “increased costs and fixed expenses linked to the deconsolidation of VW Bank Russia and the closure of part of the MAN Energy Solutions gas turbine business”.
Margin target review in early July
In response to these accusations, the group had already announced at the beginning of July that it would revise its operating margin target, aiming for a margin of between 6.5% and 7%, compared with 7-7.5% previously. The Volkswagen Group is now aiming for the “lower end” of these targets, due to the poor results of the Porsche brand, which announced last week that it was lowering its own sales profitability target, said Oliver Blume, CEO of the group, during a press conference.
Volkswagen, however, confirmed its sales forecast for the year, which it expects to increase by 5% year-on-year. At around 2:00 p.m., the Volkswagen share price lost 2.03% on the Frankfurt Stock Exchange.
Source: BFM TV
