Despite Gamble on "100,000 Job Cuts," Volkswagen Ousted from Europe's Blue-Chip Index

[Financial News] Volkswagen, Europe's largest automaker, has been ousted from the EURO STOXX 50, Europe's premier blue-chip stock index, after resorting to a last-ditch tactic involving the largest restructuring in its history. Its stock plunged to a 16-year low amid an onslaught of low-priced Chinese electric vehicles, weak sales, and a series of warnings about deteriorating earnings.
According to the Financial Times (FT) and other foreign media outlets on the 21st (local time), STOXX, a global index provider, removed Volkswagen and Dutch information and communications technology company Wolters Kluwer from the EURO STOXX 50 effective that day's trading session. Their places were taken by Nokia, a Finnish company that has transformed into an AI data-center network provider, and ENGIE, a French energy company. This is the first time Volkswagen has been dropped from the index in 15 years, since 2010-2011, shortly after the global financial crisis.
Volkswagen's humiliating removal stems from its rapidly collapsing share price. Its stock has fallen by around 30% since the beginning of this year and is now worth nearly one-quarter of its 2021 peak. Despite annual revenue of €322 billion, its current market capitalization stands at just €38 billion, reflecting investors' deep skepticism.
Seeking to overcome its management crisis, Volkswagen's executives reached an agreement with the labor union earlier this month to double planned job cuts from 50,000 to 100,000, the largest restructuring in the company's history, in hopes of a rebound. However, the stock plunged 8.3% in a single day after the company issued a profitability warning on the 18th, sharply lowering its operating margin forecast for this year from 4.0-5.5% to as low as 1%. The company cited a €6 billion write-down on the value of its stake in Porsche, the continued downturn in the Chinese market, and massive restructuring costs as reasons for the downward revision.
Volkswagen's downward pressure is expected to intensify following its removal from a major index. The 30 exchange-traded funds (ETFs) tracking the EURO STOXX 50 have combined assets of €59 billion, while sales of linked derivatives exceed €68 billion. On the 21st, the day of its removal from the index, Volkswagen shares fell more than 1% during the session even though the Frankfurt am Main stock market posted broad gains.
Analysts say the removal reflects not only Volkswagen's individual crisis but also the existential crisis facing Europe's auto industry as a whole. Last year, Stellantis, the parent company of Fiat and Peugeot, was removed from the EURO STOXX 50. Porsche Automobil Holding, the holding company of the Volkswagen Group, was also dropped from Germany's blue-chip DAX index. Only Ferrari, BMW, and Mercedes-Benz remain among the automakers in the EURO STOXX 50.
Volkswagen's removal reduced the number of German companies in the EURO STOXX 50 to 16, once again demonstrating the structural underperformance of German-listed companies that have been reduced to the "sick man of Europe." Volkswagen said, "The auto industry is entering the greatest transformation in its history, but Volkswagen remains an attractive investment opportunity," adding, "Our goal is to improve financial performance through restructuring and return to the index in the medium term."
[email protected] Park Ji-hyun Reporter