As $11 billion cash shortfall looms, we ask: is Volkswagen cooked?

According to reports from Europe, internal reviews suggest the Volkswagen Group could be more than $11 billion short of the free cash flow it needs to continue operating past 2026. If confirmed, the automaker might be forced to take drastic measures to stay afloat.

The alarming news that Volkswagen could be eleven BILLION Euros short of the free cash it needs to keep going as-is was first reported by Germany’s BILD and the Spanish-language magazine, Motorpasión, and paints a sobering picture for one of Europe’s largest and most historic carmakers already struggling under the weight of its massive EV investments, software headaches, global production challenges, dealer lawsuits, and slower-than-expected sales of its most profitable “halo” models.

And that’s just the Volkswagen brand — across the hall at the Porsche and Audi brands, the VW Group is burning even more cash. The company reported earlier this year that delays in the rollout of new EVs would cost the group as-a-whole an additional $6 billion.

What was said, what was speculated

The BILD report claims that an internal review at Volkswagen has flagged a potential €11 billion cash shortfall for 2026. CFO Arno Antlitz has reportedly asked finance teams across the group to identify ways to bridge the gap, which could include cost reductions, scaling back certain investments, and potentially selling off non-core assets.

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Motorpasión, commenting on the BILD coverage, indicated that those “non-core assets” could include smaller business units like Italdesign, Everllence, and IAV, but could also include ultra-luxury brands Bugatti, Lamborghini, and Ducati.

As if to support those theories, rumors of a sale of VW Group’s 45% ownership surfaced, with Mate Rimac has confirmed he’s in discussions with Porsche to acquire its 45% stake in the Bugatti Rimac JV formed in 2021. Speaking to Bloomberg, Rimac said the talks were no secret. “It’s about being able to make long-term decisions faster,” said Rimac, adding that negotiations are underway and a sale could conclude by 2026.

Reports suggest that a €1 billion ($1.1 billion) offer for Porsche’s stake in Bugatti Rimac is “on the table,” potentially funded by private investors and strategic partners.

As for Italian performance brands Ducati and Lamborghini, rumors of VW plans to spin off those assets to raise cash have ebbed and flowed for the better part of a decade, with the most recent serious push happening in 2020 — an effort that was seemingly stalled by the COVID lockdowns, which tossed the global economy into uncertainty.

VW hasn’t said much

It’s important to note here that Volkswagen has not confirmed the €11 billion figure, one — and, two, that there are a number of ways for a company like VW to raise the capital it needs to keep operating, from stock offerings to IP sales to government bailouts.

That said, the company’s own guidance makes the reported gap seem at least plausible. Earlier this year, VW lowered its net cash flow expectations and reduced operating margin guidance for the year showing weaker-than-expected operating profits and constrained free cash flow, indicating the company is already walking a financial tightrope.

Other market headwinds have compounded the pressure, and include plant closures, production delays, and even labor disputes at home and abroad. The rising tide of fresh new EV and PHEV brands from China on European shores are further working to dilute VW’s market share and profits, and that’s not even taking into account US tariffs, expiring EV incentives, and ongoing supply chain volatility. (!)

Taken all together, it looks like VW is facing an uphill battle, regardless of whether or not that $11B figure turns out to be accurate.

SOURCES: Bloomberg, BILD, Motorpasión; featured image by Magnus Manske, under CC BY-SA 2.0 license.

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