Porsche SE, a top shareholder of Volkswagen, has announced assuming a negative non-cash impairment from €7bn ($7.4bn) to up to €20bn ($21bn) on its stake in the leading European car manufacturer.
This move underscores the severity of Volkswagen’s cost crisis and the dwindling confidence of investors, reported Reuters.
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Porsche SE holds a 31.9% equity share and 53.3% of the voting rights in Volkswagen, with the stake currently valued at approximately €14.3bn.
It is majority owned by Porsche-Piëch family.
The German carmaker is grappling with escalating costs, stiff competition from Asia, and an ongoing, intense dispute with employee unions regarding plant closures and wage reductions.
Additionally, Porsche SE anticipates an impairment of €1bn to €2bn on its 12.5% share in luxury carmaker Porsche AG.
Both Volkswagen and Porsche have been facing challenges in China and are among the automakers preparing for the possibility of President Donald Trump increasing tariffs on vehicles imported into the US, reported Bloomberg.
These impairments were stated by Porsche SE as rough estimates, attributing them to a “market environment with further increasing uncertainties, lower demand than originally expected on various markets and increasing geopolitical tensions and protectionist tendencies”.
As a result, the company now projects a “significantly negative” group result after tax for 2024, retracting its previous forecast of €2.4bn to €4.4bn.
However, it still plans to distribute a dividend for the financial year.
According to LSEG estimates, Volkswagen’s dividend, a crucial income source for Porsche SE, is likely to decrease to €6.75 from €9 last year, following a one-third earnings drop in the first nine months of 2024 compared to the previous year.
Despite union calls to Volkswagen management for further dividend cuts to slash expenses, the company’s CFO reaffirmed last week its commitment to maintaining a payout ratio of at least 30% of after-tax profits.
Meanwhile, Volkswagen management and employee unions will meet for a fifth round of discussions on restructuring the VW brand beginning today.
