Volkswagen slashes profit outlook on $11.5B in charges

Volkswagen on Friday cut its full-year operating margin forecast to just 1%, down from a previous range of 4% to 5.5%, after flagging €10 billion ($11.5 billion) in one-off charges that deepen an already difficult chapter for Europe's largest automaker.aol+1

The German company said the charges stem from three main sources: a €6 billion non-cash goodwill impairment on its Porsche Dr. Ing. h.c. F. Porsche AG business segment, additional restructuring costs tied to expanded early retirement schemes and the planned sale of its Osnabrück plant, and non-cash write-downs on assets at its fully consolidated Chinese operations. Of the €10 billion in special items, €0.9 billion was already booked in the first half of the year, with the bulk expected to land in the third quarter.investing+1

Shares fell as much as 7.5% in Friday trading — the largest intraday drop in a year, according to Bloomberg — with the selloff spilling over to peers BMW Bayerische Motoren Werke AG and Mercedes-Benz.bloomberg

China and the EV Shift

Volkswagen pointed to a "further deterioration in the market environment, especially in China, as well as an accelerated shift in demand in favour of battery-electric vehicles" as core drivers of weaker operating performance. The company said conditions have fallen short of expectations particularly for its Audi and Volkswagen Passenger Cars brands.tradingview+1

The warning follows a first half in which Volkswagen's sales in China dropped 20%, even as European electric vehicle orders rose more than 50% in the second quarter. The company now expects group sales revenue of around €315 billion, compared with €321.9 billion in 2025.businessupturn+1

Porsche Holding Also Hit

Porsche Automobil Holding SE, the controlling shareholder of Volkswagen, also cut its outlook on Friday, now expecting a consolidated result between minus €0.5 billion and plus €1.5 billion — €2 billion lower at each end than previously forecast.marketscreener+1

Restructuring Pressures Mount

Reuters reported that the profit warning "deepens a crisis" at the world's second-largest automaker, which earlier this month reached an agreement with unions on far-reaching job cuts amid fierce competition from Asian rivals, U.S. tariffs, and stagnant European demand. Adjusted for the special items, Volkswagen said its operating margin would be around 4% — closer to the prior guidance but still below analyst expectations of 4.1%.tradingview+1

Volkswagen maintained its net cash flow guidance for its automotive division at €3 billion to €6 billion and net liquidity expectations at €32 billion to €34 billion. The company's interim financial report for the third quarter is due October 29.investing+1