Volkswagen Announces Major Restructuring Amid Steep Profit Decline

Volkswagen launches massive cost-cutting plan after 2025 profits plunge 44%. Porsche's operating profit collapses 98%, becoming a major financial burden on the group.

Facing a severe profitability crisis, Volkswagen Group has initiated a sweeping cost-cutting program. The drastic measures come in response to a dramatic collapse in net income and operational results for the 2025 fiscal year, with the company's prestigious subsidiary, Porsche, becoming a significant financial burden.

Unprecedented Cuts to the Workforce

In a bid to slash fixed costs and improve competitiveness, particularly against rivals like BYD in the crucial Chinese market, CEO Oliver Blume has launched an unprecedented turnaround plan. The cornerstone of this strategy is a substantial reduction in personnel. By 2030, approximately 50,000 jobs in Germany are slated to be eliminated through socially responsible measures. The core Volkswagen brand alone will account for 35,000 of those positions.

Investor sentiment regarding this challenging transformation remains decidedly negative. The company's shares closed yesterday’s trading session at €91.72, reflecting a year-to-date decline of 13.55 percent.

Financial Performance Hits a Low Point

The automaker's full-year results painted a sobering picture. While group revenue remained largely stagnant at approximately €322 billion, profitability metrics deteriorated sharply. Net profit plummeted by 44 percent to €6.9 billion. The operating result was nearly halved, landing at €8.9 billion.

This collapse drove the operating margin down to a meager 2.8 percent—a level not seen since the peak of the diesel emissions scandal in 2016.

Porsche's Unexpected Drag on Earnings

A primary driver of the group's woes was the stunning underperformance of its typically high-margin Porsche brand. The operating profit within the Sport Luxury segment collapsed by 98 percent to just €90 million. This decline is attributed to special costs totaling €3.9 billion, stemming from three major items:

• A €2.4 billion charge for the strategic realignment of its combustion-engine model portfolio.
• €700 million in burdens related to U.S. import tariffs.
• A further €700 million for the winding down of its battery subsidiary, Cellforce.

Revised Targets for the Road Ahead

Looking forward, Volkswagen's management has set new financial targets for the 2026 business year. The group is aiming for an operating margin between 4.0 and 5.5 percent.

Concurrently, Porsche is projecting revenue in the range of €35 to €36 billion, with an operating margin target of up to 7.5 percent as it seeks to recover from its recent setbacks.