Volkswagen Faces Hurdles as Global Trade Issues Weigh on Profitability

Volkswagen's recent earnings report highlights significant pressures from restructuring and rising costs amid shifting global trade dynamics, potentially stifling its profitability for the coming year.

Volkswagen, Europe's largest car manufacturer, reported a decline in earnings last year, with projections indicating only a slight improvement in profitability for 2025. The company's ongoing adjustments aim to address the ramifications of evolving trade policies in the United States and increasing competition from Chinese automakers.

In a statement released on March 11, 2025, Volkswagen acknowledged flat revenues and a 15 percent drop in operating profit for 2024, attributing these results to "a significant increase in fixed costs." Volkswagen expects its operating profit margin to remain relatively stable, forecasted between 5.5 to 6.5 percent, mirroring last year's 5.9 percent.

Arno Antlitz, Volkswagen's Chief Financial Officer, pointed out that the company's outlook was shaped by "global economic challenges and profound changes within the industry," including heightened political uncertainty and expanded trade restrictions.

Restructuring efforts have pushed the company to incur nearly $1 billion in severance expenses tied to its administrative division. Additionally, an agreement with the IG Metall union outlines plans to reduce the workforce by 35,000 positions via retirements and attrition, avoiding immediate factory closures in Germany.

Volkswagen's Chief Executive Oliver Blume indicated that future negotiations with the White House would depend on receiving a clear tariff strategy from the United States, emphasizing the significant impact of trade discussions on the automaker's strategic direction.