BERLIN/FRANKFURT — Volkswagen on Friday flagged €10 billion (US$11.5 billion) in one-off costs, mostly at struggling sports car brand Porsche, deepening a crisis at the world’s second-largest automaker that has already triggered the group’s biggest-ever restructuring.
The profit warning deepens a crisis at Volkswagen, one of Europe’s most storied industrial heavyweights that illustrates the continent’s struggles with changes to the massive geopolitical environment affecting its top two trading partners: the U.S. and China.
The news raises questions over Porsche, which has been hard hit by US tariffs and collapsing demand for foreign luxury brands in China, creating a perfect storm for the division that posted a profit margin of just 1.1 per cent last year.
The impairments, flanked by a profit warning, come two weeks after the company agreed on a major transformation deal with its shareholders, including another 50,000 job cuts, a simplification of its structure and possible plant closures.
Having heavily relied on China and the United States, Volkswagen has been squeezed by drastic changes in both markets, including levies on US imports as well as a decline in China, where it lost the crown as top automaker in 2024.
“We have no time to lose,” finance chief Arno Antlitz said in an internal memo seen by Reuters, citing a 20 per cent contraction in China, the world’s biggest auto market, Asian rivals muscling into Europe and rising sales of less profitable electric cars.
“There is no sign of consolidation,” he added with regard to China. “We cannot escape this trend.”
Shares in Volkswagen closed 5.6 per cent lower, while Porsche’s stock fell 3.3 per cent. Volkswagen’s top shareholder Porsche also cut its outlook, sending its shares 4.9 per cent lower.
Some €6 billion of the impairment charges stem from new mid-term assumptions for Porsche, of which Volkswagen owns 75 per cent, reflecting lower overall expectations for the business that has already thinned out its network of Chinese dealerships.
Volkswagen, which also includes the Audi, Skoda and Seat brands among others, now expects a profit margin of 1 per cent at the most in 2026, having previously issued guidance for margins between four per cent and 5.5 per cent. Analysts, on average, expect a margin of 4.1 per cent.
It warned of a “further deterioration in the market environment, especially in China, as well as an accelerated shift in demand in favor of battery-electric vehicles.”
This, it said, would lead to lower expectations for the Audi and Volkswagen passenger car brands.
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Additional reporting by Tristan Veyet; Editing by Kevin Liffey, Louise Heavens and Alexander Smith
