Market Analysis

Volkswagen reported a 42% drop in third-quarter operating profit on Wednesday, impacted by weak performance in its core passenger car division and rising costs, including those related to model revamps.

The automaker faces several challenges, including complex governance structures, misjudged investments in electric vehicles, management missteps, and declining revenues in China. Additionally, Germany's bureaucratic hurdles have compounded difficulties for the world’s second-largest automaker.

During the quarter, Volkswagen adjusted its annual outlook twice, reflecting similar challenges reported by other major automakers like BMW and Mercedes-Benz. The company is also engaged in contentious negotiations with unions over a proposed overhaul that may include its first-ever plant closures in Germany in its 87-year history.

A second round of discussions between Volkswagen and German union IG Metall is set to continue on Wednesday, after the head of the works council warned of possible strikes if talks were to stall. The company's earnings before interest and taxes (EBIT) reached 2.86 billion euros ($3.09 billion) for the July-September period, closely aligning with LSEG's estimate of 2.80 billion euros.

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