Volkswagen’s $11.5-billion profit warning is raising fresh questions about the future of the automaker’s $7-billion battery gigafactory in St. Thomas, Ont., a project built on up to $13 billion in Canadian taxpayer subsidies.
The German automaker said Sept. 18 it was booking roughly 10 billion euros, about $11.5 billion, in one-time impairment charges, according to CP24 and Reuters. About 6 billion euros of that stems from downgraded expectations for Porsche, the luxury brand Volkswagen owns 75 per cent of. Porsche’s profit margin fell to just 1.1 per cent last year as U.S. tariffs and a 20 per cent contraction in China’s auto market hit sales, and Volkswagen lost its title as China’s top-selling automaker in 2024.
Volkswagen slashed its 2026 profit margin guidance to a maximum of one per cent, down from a previous forecast of four to 5.5 per cent. Chief financial officer Arno Antlitz said the company was accelerating its shift toward battery-electric vehicles amid what he called further deterioration in the market, particularly in China. “We have no time to lose,” Antlitz said. The warning comes two weeks after Volkswagen approved its largest restructuring ever, including 50,000 additional job cuts and the possibility of shutting plants.
None of that is happening in St. Thomas, at least not yet. But the timing puts renewed scrutiny on Canada’s biggest-ever single corporate subsidy deal. Ottawa and Ontario pledged up to $13 billion combined in 2023 to lure Volkswagen’s PowerCo battery unit to a 350-acre site outside London, with Ontario covering roughly a third of the total. The plant is meant to employ up to 3,000 workers directly once fully running, with thousands more jobs promised across the supply chain. Production is still slated to start in 2027.
What often gets left out of coverage of that subsidy figure is how it is structured. Federal officials designed the incentive to mirror the production-linked tax credits in the U.S. Inflation Reduction Act, meaning Ottawa’s payments are tied to how many batteries actually roll off the line, not a fixed upfront cheque. In theory, that limits how much taxpayers are on the hook for if Volkswagen scales back output. In practice, it also means a slower or smaller St. Thomas plant would mean a smaller payout to Volkswagen, but also fewer of the promised jobs and less of the economic activity Ottawa and Queen’s Park used to justify the deal to voters.
This would not be the first sign of caution around the project. Volkswagen has already flagged a slower ramp-up at St. Thomas once before. In March 2025, chief executive Oliver Blume acknowledged tariff risk to the plant, which is designed to help supply Volkswagen’s U.S. assembly lines, while Antlitz disclosed the company would delay work on an unspecified number of the plant’s six production blocks because of weaker electric vehicle demand than originally forecast. The 2027 production start date held, but the timeline for reaching the plant’s full 90-gigawatt-hour capacity, once targeted for mid-2028, was pushed back to match actual market demand.
Volkswagen has not said whether St. Thomas factors into this week’s fresh round of cost-cutting, and the company has given no indication it is reconsidering the site. Still, the pattern is now familiar: a global EV slowdown squeezing Volkswagen’s finances, followed by caution around the Ontario project’s pace, even as the headline investment figure stays intact. For Canadians who will spend years paying into this deal through the tax credit structure, the open question is not whether St. Thomas gets built, but how close it comes to the 3,000 jobs and full production volume that were used to sell the subsidy in the first place.
Via CP24/CTV News: https://www.cp24.com/news/money/2026/09/18/volkswagen-crisis-worsens-with-profit-warning-over-porsche-led-us115-billion-hit/
