00:00What do you think the effect the Iran war is having on the supply chains?
00:06So I think this is one of the big questions that we've had and we've been trying to get our
00:09arms around ever since the war started here in Europe
00:12is what is the effect going to be on European companies, on supply chains, particularly industrial companies, as well as
00:17on inflation in the continent.
00:19I caught up with some of the ECB governing council members last week and basically they said they didn't really
00:23know,
00:24that they really couldn't get their arms around the story and what the impact would be on inflation.
00:27So it's good to have an opportunity to speak to one of the largest industrial companies here in Europe.
00:31And you heard it there from the chief financial officer of Volkswagen, Arno Antlitz, saying that basically because of how
00:36they've structured their situation with energy,
00:39they have long-term supplies, long-term contracts, that the shock and the increase that we've seen in gas prices
00:44is not going to have an immediate effect on their P&L and on their earnings.
00:48That being said, those are some of the upstream sort of concerns, the input costs for Volkswagen.
00:53There's also questions about commodities, being able to get, for example, that aluminum supply, get the actual deliveries of the
00:59cars,
00:59much of which are shipped on cargoes on ships across the open seas, which obviously are constrained by the situation
01:04Iran.
01:05But for the time being, they say that the constraint, that they're not being terribly affected about it.
01:10That being said, if this were to be prolonged, he is concerned about the fact that this input cost could
01:14go up for all of their suppliers.
01:16Their suppliers could raise prices.
01:17And, of course, there's the question of consumer sentiment.
01:19If there's higher inflation in Europe, higher concern in Europe, are you really going to go out and buy a
01:23car?
01:24I'm also curious what else stuck out to you about the earnings.
01:30Yeah, if you want to look at the earnings from Volkswagen, if you're looking for green shoots and a sort
01:35of positive story on the German industrial story,
01:37you did not find it in Volkswagen earnings for 2025.
01:40They gave their full-year results.
01:41We should say that the operating profit for Volkswagen, it was the lowest it has been since 2016.
01:46That was the throes of Dieselgate.
01:48Same thing on margins.
01:49We saw the margin come down to 2.8% for selling cars throughout the year of 2025.
01:54Again, that's the lowest since 2015, I should say, in the throes of Dieselgate.
01:59That being said, they took a lot of one-off write-downs in terms of EVs and sort of pivoting
02:03their strategy.
02:04So that should not be represented in the year to come.
02:06That being said, a couple other stats for you.
02:08They only sold 266 Porsches last year, and the margin that they had on Porsche was 0.3%.
02:14That means that they basically made no money selling Porsches.
02:17The year before, the margins were 14.5%.
02:20That sort of illustrates the difficulty that Volkswagen is experiencing, not just in the American market because of tariffs,
02:26but also in the Chinese markets where we had a sales decline of 6% last year.
02:31That puts the question of cost cuts squarely in focus, and that's what I asked the CFO of Volkswagen.
02:36Where is he going to find those cost cuts?
02:37Let's have a listen.
02:39We have to prepare for a more intense competition, so we have to continue to work on the cost side.
02:46Reduce costs, reduce complexity, and draw even more group synergies.
02:52And this is exactly what we concentrate on in the next month.
02:59So cost cuts are squarely in focus for Volkswagen.
03:02Just a final word.
03:03The only sort of market, one of the main markets we saw actual growth last year was in Europe at
03:075% growth.
03:08That being said, in the next couple of months, you're going to have BYD, the EV maker from China,
03:12making cars within the European Union, within the tariff barrier for the first time.
03:17So in competition, it's going to heat up here.
03:18And one final point, and this I found really very interesting, is when Volkswagen, in the ways in which they're
03:23trying to find growth,
03:24we understand that they're going to be teaming up with defense companies.
03:26So Volkswagen could be making vehicles for the battlefield, which is part of one of the industries that's really outperforming
03:32here in Germany.
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