You have to understand that Volkswagen and Volkswagen is not the same.

Volkswagen Group is the mother. The big one with >600k employees.

The Volkswagen Group has several brands/divisions - I've added the profit margin for 1st half 2016:

* VW cars: margin 1.7%

* Audi: 8.8%

* Skoda: 9.6%

* Porsche: 16.7%

* Seat: 2.1%

Then there are VW trucks, Lamborghini, Bentley, Bugatti, Ducati, Scania and MAN. All those are brands of Volkswagen Group.

From 2011 to 2014 they did more than 10Bn in profit each year [1] on revenues of about 150-200Bn [2] so in most normal years it looks more like 5-10%.

[1] https://www.statista.com/statistics/272053/operating-profit-...

[2] https://www.statista.com/statistics/264349/sales-revenue-of-...

Just a note on that first link. It's operating profit which isn't showing the effects of taxes and income.

VW has long suffered from very low levels of productivity. According to Bloomberg, they employ as many people as Toyota and GM combined while making half as many cars as the combined entity.

https://www.bloomberg.com/gadfly/articles/2016-11-18/vw-job-...

Part of the problem are the unions and a large ownership stake by the state, which is naturally not very interested in having their constituent lose their jobs.

> Part of the problem are the unions and a large ownership stake by the state

That's interesting. I thought VW had been fully privatized, but TIL the German state of Lower Saxony still owns 20% of the company - http://www.volkswagenag.com/content/vwcorp/content/en/invest...

Usually a shareholder needs to own more than 25% of the shares to veto major decisions. For Volkswagen there is a special law lowering this requirement to 20%, which conveniently is the number of shares the state of Lower Saxony owns.

This law also requires a two-third majority in the board of directors (which is distinct from the executive board) to set-up or close down factories. Half of the members in the board of directors are (as in all large German companies) employee representatives, granting them a veto power for those decisions.

This description sounds quite communistic i guess.. But it works really well for everybody.. Some restructuring is necessary though- the whole affair is prone to dig into a technology-tree-branch and stay stuck there.

Or maybe there's no problem at all and the Bloomberg reporter doesn't know what he's talking about?

Some quick Googling suggests that Toyota outsources up to 70% of their parts. (http://artoflean.com/index.php/2014/01/07/444/)

VW is much more vertically integrated. (http://www.autoblog.com/2012/12/06/how-volkswagen-is-run-lik...)

  "How can this be possible? How can VW look so uncompetitive
  from a productivity standpoint, yet out-earn all of its
  competitors?

  "Ah, that's the magic of VW's corporate structure."

Volkswagen pays out high salaries to their line workers, requiring little work by comparison (when measured in hours). VW pay is up 20-50% compared to comparable industry jobs.

Working in manufacturing (knee and hip implants, powered surgery tool geartrains and housings), attention to detail is what we get paid for, not the backbreaking work of pushing a cycle-start button.

Anybody can push a button, but how soon will they notice that one ±.0002" countersink diameter has drifted out of tolerance on a part with dozens of features? If it's slightly out of tolerance, will they have the integrity to reject the parts, or will they let them slip through the cracks? Will they know which combination of metrology equipment will give the most accurate measurement in a particular scenario?

Good machinists and CNC setup operators seem to be hard to find. In industries with high liability risks, you're better off not scraping the bottom of the barrel.

Hey, I would not say "little work". Most people at Volkswagen work at the production line and this work is really backbreaking.

> and this work is really backbreaking.

it is still physical work, but not as hard as you claim. Modern car plants aren't sweat-shops.

I've worked at a modern car plant, and it's definitely hard work, to the extent of being very painful at the end of the day at first when you're not used to it. It does take its toll, and it's not something you can do for decades unless you are exceptionally healthy.

There's a reason the staff is mostly young, and it's not because everyone goes into management ten years into the job.

I think that sort of profit reporting is similar to the games amazon plays - pick the lowest reported profit your investors will stomach, and make sure to spend enough money on other stuff to make your profit equal that number. If VW experienced a relatively small drop in car sales, they could just stop plowing money into vanity projects like Bugatti or various other long-term R&D to maintain their 2% margin.

The car industry is 100+ years old. Many stable industries are run like this.

I wouldn't count VW as representative of the industry right now.