Crisis-wracked Volkswagen warns of €10bil hit to profits

German automotive manufacturer Volkswagen is bracing for a 10 billion euro reduction in its projected annual profits, according to the company's warning issued on Friday. The company cited challenging conditions in China, issues at its Porsche subsidiary, and restructuring expenses as factors contributing to the potential earnings hit.

Volkswagen, Europe's largest automaker, is currently executing the largest job cuts in the global automotive industry, aiming to reduce its workforce by up to 100,000 by 2030, an increase from the previously announced 50,000 positions. The company's finance chief, Arno Antlitz, highlighted the intensified demand for battery-electric vehicles, driven by geopolitical factors and soaring fuel prices.

However, Volkswagen reported earning significantly less from these electric vehicles compared to traditional combustion engine cars. Additionally, the company reduced Porsche's value by 6 billion euros, citing less optimistic expectations for the sports-car maker's future performance. Porsche's sales in China have plummeted, and the electric models have struggled to gain traction, leading to costly strategic adjustments.

The write-down of Porsche is Volkswagen's second in a year, following a 5.1 billion euro hit recorded in September after the luxury carmaker revamped its product lineup and lowered profit targets. Volkswagen also announced another 2 billion euro charge, linked to write-offs of assets in China, the sale of a plant in northern Germany, and the expansion of early retirement schemes.

The company recently announced plans to sell its Osnabrück plant to Israeli investors and the German state of Lower Saxony to facilitate an upcoming defense project. Volkswagen's share price fell by 7.55% following the announcement, while fellow German automakers Mercedes-Benz and BMW also declined by over 5%.