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Volkswagen’s Top Owner Warns of Up to €20 Billion Impairment

By Craig Trudell and Monica Raymunt
A VW logo at the Autostadt customer center at the Volkswagen AG headquarters and auto plant complex in Wolfsburg, Germany, on Monday, Oct. 28, 2024. VW is expected to post declining sales and profit when it reports third-quarter results on Wednesday. Photographer: Liesa Johannssen/Bloomberg (Liesa Johannssen/Bloomberg)

(Bloomberg) -- Volkswagen AG’s half-baked financial planning process — hamstrung by its messy restructuring of the VW brand — threw a wrench into a routine accounting exercise and highlighted just how much strain Europe’s top carmaker is under.

Volkswagen informed Porsche Automobil Holding SE on Friday that it no longer expects to complete its corporate planning by Dec. 31, forcing the holding company to use analysts’ assumptions to conduct impairment testing on its investment in the automaker.

Porsche SE said in a filing that it assumes a negative non-cash impairment of €7 billion ($7.3 billion) to €20 billion on the carrying value of its investment in Volkswagen. The holding company is majority owned by the billionaire Porsche-Piëch family.

Similar circumstances apply to Porsche SE’s carrying value of the sports-car manufacturer Porsche AG. The holding company said in the filing Friday that it expects a €1 billion to €2 billion impairment to the carrying value of its investment in the 911 maker.

Porsche SE said it can only roughly estimate the carrying amounts, citing “further increasing uncertainties, lower demand than originally expected on various markets and increasing geopolitical tensions and protectionist tendencies.” Volkswagen and Porsche both have been struggling in China and are among the automakers bracing for incoming President Donald Trump potentially raising tariffs on vehicles imported into the US.    

Volkswagen’s financial planning has been hamstrung by tense negotiations between management and unions over potential plant closures in Germany that would be the first in the 87-year history of the automaker. The two sides will meet for a fifth round of talks on restructuring the VW brand starting Dec. 16.

Porsche SE said the impairments will not have an effect on its cash, or on VW or Porsche’s financial forecasts for this year. The holding company’s management board still expects that a dividend will be distributed for the 2024 financial year.

(Updates with additional context starting in the third paragraph.)

©2024 Bloomberg L.P.