Volkswagen Faces October Reckoning With a 1% Margin Target, a Massive Recall and a 34% Share Slide

Volkswagen ended several in-house collective agreements effective December 31, 2026, as IG Metall talks loom and a 2.16 million-vehicle recall adds to costs.

Volkswagen has entered one of the most demanding stretches in its recent history, with labor negotiations, a costly global recall and a slashed profitability outlook all converging on a single month. The Wolfsburg-based automaker closed Monday at EUR 68.72, extending its year-to-date decline to 34%. Pre-market indications on Tuesday put the stock at EUR 68.96, with the 52-week low of EUR 67.02 not far below.

The pressure stems from a decision made in mid-September, when management cut its operating return on sales forecast for the current fiscal year to a maximum of 1% and flagged special charges of EUR 10 billion. Restructuring costs and write-downs at subsidiary Porsche, combined with persistent weakness in China, have forced the group to adjust its cost base across major divisions.

Collective Agreements Terminated as IG Metall Tables Demands

On September 30, Volkswagen formally terminated several in-house collective agreements with effect from December 31, 2026. Reuters reported that ten contracts are to be renegotiated. The future agreement, including job security provisions, was explicitly excluded from the move. Existing rules remain in force for now to allow orderly talks, with any terminations taking effect no earlier than early 2027.

Talks with IG Metall over the future bargaining architecture are set to begin in the second half of October. The union presented its demands just over a week ago, and the stock has shed 2.1% since then.

Battery Joint Ventures Take Shape Across Three Countries

While labor tensions simmer, Volkswagen is pressing ahead with its electrification strategy. On September 28, the Volkswagen Group, its battery subsidiary PowerCo SE and China's Gotion High-Tech agreed to establish three joint ventures for the production of LFP battery cells and cathode material in Valencia, Šurany and Kenitra. The partnership also covers joint procurement and distribution across Europe.

Under the terms of the Valencia cell factory, Gotion will invest EUR 1.1 billion in exchange for a 49% stake, while PowerCo retains a 51% majority. All agreements remain subject to regulatory approval. Separately, Volkswagen is selling a 5.3% stake in Gotion but will keep a relevant holding, according to company statements.

The group has framed these moves under its "For Europe" initiative, which commits it to strengthening European value chains, future-proof jobs and key technologies such as batteries and software.

Recall Adds to the Bill

Quality issues have compounded the financial strain. Roughly two weeks ago, Volkswagen launched a worldwide recall covering 2,159,054 vehicles over possible steering defects. Of those, 895,832 are registered in Germany alone. Corrosion on the mounting screw of the steering gear could cause it to break, potentially leading to steering failure. The stock has fallen 4.2% since the recall became known.

Investors will get a clearer picture of how these operational setbacks and transformation costs are feeding through to earnings on October 29, when Volkswagen publishes its interim report for the January-to-September period.