Volkswagen issues profit warning over $11.5-billion hit led by Porsche

Volkswagen VWAGY on Friday flagged €10-billion (US$11.5-billion) in one-offs, 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 news raises questions over Porsche, which has been hardest hit by U.S. 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 a major transformation deal with its shareholders, including another 50,000 job cuts, a simplification of its structure and possible plant closings.

Having heavily relied on China and the United States, Volkswagen has been squeezed by drastic changes in both markets, including painful levies on U.S. imports as well as a decline in the Chinese market, where it used to be the biggest player until 2024.

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Shares in Volkswagen closed 5.6 per cent lower on the announcement, while Porsche’s stock fell 3.3 per cent. Volkswagen’s top shareholder Porsche SE also cut its outlook, sending its shares 4.9-per-cent lower.

New mid-term assumptions for Porsche, of which Volkswagen owns 75.4 per cent, led to an impairment of some €6-billion, it said.

The profit warning deepens a crisis at Volkswagen, which earlier this month managed to agree far-reaching cuts with unions in the face of fierce competition from Asian rivals and stagnant demand in Europe.

“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.

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 guided for 4.0 per cent to 5.5 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.