Dive Brief:
- Volkswagen Group recognized 1 billion euros ($1.08 billion) in restructuring costs during the first half of 2024 as part of its efforts to reduce personnel costs over the long term, according to its earnings report released Thursday.
- The automaker has faced reduced margins this year with higher overhead costs due to wage increases and lower vehicle sales, said Arno Antlitz, CFO and COO of Volkswagen Group, during Thursday’s earnings call.
- “In an environment characterized by excess capacity and pricing competition specifically in Europe and China this is a trend, which we need to reverse,” he said. “We will rigorously continue to execute our performance programs to improve profitability across all brands and groups and value drivers.”
Dive Insight:
For the automotive division, first half revenues were flat, but its operating result dropped by 500 million euros year over year for a total of 8.6 billion euros, according to the report.
Volkswagen cited negative impacts from unfavorable unit sales, mix and pricing, higher expenses for new products and restructuring costs.
Antlitz said the automotive division’s R&D costs increased by 1.2 billion euros as the company accelerates its electrification and digitalization transformation.
“It took some important decisions to speed up the restructuring of our European business and we made significant progress with a number of strategic initiatives, specifically software and finally the launch of our PPE [Premium Platform Electric] platform,” he said.
Volkswagen brand results were below the company’s expectation, Antlitz said, and “clearly below our ambition.” However, Skoda and Volkswagen’s commercial vehicle segments helped to offset the brand’s shortcomings, he continued.
Volkswagen Group CEO Oliver Blume said the company has taken all of the organizational steps needed to improve the brand’s performance, including offering early retirements and implementing hiring freezes.
“And now it is about costs, costs and costs,” he said during the earnings call.
