Economy
Biggest restructuring deal ever eases crisis at Volkswagen
Volkswagen shares hit an 11-week high Friday after the supervisory board of Europe’s largest automaker struck an ambitious turnaround agreement that put the focus on sweeping job cuts and averted a clash between major stakeholders.
The deal announced late Thursday on the biggest restructuring in the group’s 89-year history includes a further 50,000 job cuts, bringing the total agreed to 100,000, and leaves open the future of four of its German plants.
Volkswagen, like most of its European peers, is under pressure from painful tariffs in the United States, falling sales in former cash cow China and aggressive Asian rivals entering the stagnant European market.
All these factors have gnawed at the group’s operating margin, which stood at 3.8% in the first half, down from 7.9% in 2022, its peak over the past decade.
Shareholders and analysts expressed relief that Volkswagen – with a workforce of more than 650,000, a complex structure and powerful stakeholder groups – is still able to make far-reaching decisions in times of crisis.
Volkswagen shares were up 5.9% at 1046 GMT, the second-biggest gainer on the pan-European STOXX 600 index, having earlier hit their highest since June 18.
Ingo Speich of Volkswagen shareholder Deka Investment called the agreement a breakthrough: “Does this mean Volkswagen is out of the woods? Definitely not. Now comes the hard part: execution.”
Moritz Kronenberger at Union Investment, while welcoming the deal, also said the pressure was now on management to deliver: “The ball is now entirely in the executive board’s court. There are no more excuses.”
Management, outnumbered by unions and Lower Saxony on the supervisory board, had considered calling a shareholder meeting to push through its demands, which would have been an unprecedented stakeholder conflict at the carmaker.
While the deal gave no details on where and by when the cuts would happen, Volkswagen CEO Oliver Blume previously said that half of the savings would have to come from Germany, suggesting around 25,000 job cuts at its local operations.
Details of the job cut program will have to be hammered out between management and unions, which secured a job guarantee for most of Volkswagen’s German operations until 2030 as part of a previous turnaround package in 2024.
“We are pleased this agreement has been achieved,” Citi analysts wrote. “Nevertheless, this agreement does not automatically change the EU competitive environment, continued China market-share losses, and raw material cost pressures.”
Volkswagen will seek alternatives for its German plants in Emden, Hanover, Zwickau and Neckarsulm following production phase-outs in the next decade, which could cover a range of options, including repurposing them under new ownership, people familiar with the matter have said.
Olaf Lies, state premier of Lower Saxony – which holds 20% of Volkswagen’s voting rights – said closing the plants was not a done deal and that management had been asked to look for alternative solutions.
“If we have to cut capacity, the automatic conclusion cannot be that we cut it in Germany,” he told reporters, still acknowledging that Europe’s auto sector was under enormous pressure.
Diesel hit a new record price in the United States on Friday, soaring to an average of $5.85 a gallon for the first time ever as the six-month war with Iran disrupts the world’s flow of fuel.
Because diesel is used for many freight and delivery networks, higher diesel prices mean higher transportation costs for a long list of everyday goods.
More expensive fuel is increasing bills for businesses across sectors – some of which have already passed off costs to consumers in the form of added fees on online orders and packages in the mail. And shoppers may see more and more sticker shock trickle into store shelves.
The increases could have political implications, with economic issues likely to be top of mind for many voters in November’s midterm elections.
One of the most immediate strains falls in the grocery aisle, particularly with produce, meat and other perishable foods that need to be hauled in and restocked frequently – or even harvested using diesel-powered farm equipment. It can take time for all of those costs to trickle down.
Still, experts warn that price hikes could mount the longer diesel remains expensive. A range of other products are also transported by diesel trucks, trains and boats, including clothing, cosmetics, furniture and more.
The price for regular gasoline has also been going up, although not as fast as the price of diesel. The average price was $4.15 a gallon, compared with $3.20 at this time last year, according to the American Automobile Association, or AAA.
What’s driving latest jump
Before the U.S. and Israel launched their war against Iran in late February, the national average for a gallon of diesel was about $3.76 in the U.S., per AAA. Prices quickly climbed as the cost of crude oil – the main ingredient in diesel, as well as gasoline – soared amid supply chain disruptions and production cuts across the Middle East, notably with most tanker traffic bottlenecked in the key Strait of Hormuz.
Despite prices cooling somewhat during hopes for peace earlier in the summer, oil has now renewed its climb as fighting once more escalates between the U.S. and Iran. Brent crude, the international standard, was trading at more than $95 a barrel Friday, up from roughly $70 before the war. Prices at the pump always follow closely behind.
The last time U.S. businesses and drivers saw sky-high fuel prices was in June 2022, when diesel reached as high as nearly $5.82 a gallon on average, months after the Ukraine war began and world leaders imposed sanctions against Russia, a leading oil producer.
When adjusted for inflation, however, prices have been higher in the past. Ahead of the 2008 financial crisis, for example, diesel peaked at about $4.74 a gallon – equivalent to $7.20 in 2026, according to the government’s latest data. And 2022’s record of nearly $5.82 would be about $6.56 this year when accounting for inflation.
That doesn’t take the pain away from today’s steep prices, which are already bringing ripple effects for the economy and wider costs of living. Drivers are feeling the pain each time they fill up gasoline, too.
The average $4.15 for a gallon of regular unleaded is up from $2.98 before the Iran war, although still well below the 2022 peak of nearly $5.02 a gallon nationwide.
Diesel has been more expensive than gasoline for decades, and its price has risen at a faster pace during recent energy crises. Some reasons include more limited supply, less flexibility in demand, and diesel’s position in global commerce overall.
Individual households may find ways to drive less when gas prices are high, for example, but there are fewer immediate substitutes for networks that rely on diesel to help produce and haul goods worldwide.
All eyes on food
Diesel is integral to every part of the food supply chain. It powers farm equipment and fishing boats as well as the trains, cargo ships and trucks that get food to grocery stores.
Fuel accounts for roughly 15% to 30% of the total cost of food, according to the Independent Grocers Alliance, a grouping of 7,500 global supermarkets. Because of this, higher diesel costs often result in more expensive food, although it can take a while for energy shocks to wind their way through the supply chain.
Items that need to stay refrigerated while they’re transported are often the first to see prices rise, according to David Ortega, a professor of food economics and policy at Michigan State University. In July, for example, overall U.S. grocery prices were up 2.7% compared to last July, but seafood prices were up 7% and fresh fruit prices were up 4.9%.
Ortega cautioned that there can be other factors at play when food prices go up or down. Lettuce also faced higher transportation costs in July, but a drop in demand due to the cyclospora outbreak caused prices to fall.
Still, consumers could feel more of a squeeze the longer diesel prices remain high.
“Early on, much of the cost increase gets absorbed along the supply chain through existing freight contracts and retailer margins,” Ortega said. “But as contracts reprice and fuel surcharges take hold, more of that cost makes its way to the grocery store.”
More fuel shocks
Back in April, e-commerce giant Amazon rolled out a temporary 3.5% fuel and logistics surcharge on some third-party sellers. And United Parcel Service, FedEx and the United States Postal Service also moved to add fees on some of the packages they ship earlier in the war, citing rising operational costs for fuel overall.
Ajesh Kapoor, CEO and founder of trucking technology company SemiCab, said trucking and transportations can adapt to rising diesel prices – but at some point there is a limit.
“Diesel price has a very, very direct impact on everything that moves on pretty much any mode,” Kapoor said.
The ramifications extend beyond the movement of consumer goods. Some public transit buses and trains also run on diesel – and diesel generators are often used for backup or emergency power, if not central electricity sources in some remote parts of the world.
Experts warn that the consequences could continue to deepen – particularly in countries in Africa and Asia, which rely more heavily on imports from the Middle East and have already been hit the hardest by energy shocks over the course of the war.
Neil Atkinson, energy analyst and senior fellow at the National Center for Energy Analytics, said refined oil products like diesel are becoming more expensive as supplies get stretched.
“This is gradually becoming a major crisis because A) the prices themselves are very high – but the physical stocks of these products are dwindling,” he said in a weekly briefing with maritime data firm Lloyd’s List Intelligence, pointing to the strain on the global refining system. “This cannot go on forever.”
Türkiye’s exports rose 8.1% to $23.5 billion (TL 1.14 trillion) in August, reaching an all-time high for the month, a top official said on Thursday, also announcing that the eight-month cumulative figure, as well as the annualized figures, reached fresh records.
“In August, our exports rose by 8.1% compared to the same month of last year, reaching $23.5 billion. Thus, we achieved the highest August export figure,” Trade Minister Ömer Bolat said while announcing preliminary foreign trade data for the month.
“This is the third-highest growth rate after the 21% increase in April and the 22% increase in June,” he added.
“Although August is considered a vacation month in the West, this increase is truly a great achievement. This growth amounts to $1.766 billion,” the minister said.
Speaking at the event in Ankara, Bolat also said exports from the country hit a record high of $185 billion in the January-August period, up 4%.
He also noted that annualized exports reached $280.3 billion as of August, breaking the record in the republic’s history.
Starting his presentation on the data, Bolat also reflected on recently announced growth figures and inflation.
He highlighted that Türkiye’s economy accelerated starting from the second quarter, achieving growth rates of 2.3% in the second quarter and 2.5% in the first half of the year.
He also stated that Türkiye’s national income exceeded $1.7 trillion in the first half of the year, hitting its highest level ever.
He also pointed out the contribution of exports to growth, suggesting that net goods and services exports contributed 0.6 percentage points to economic growth in the second quarter.
Bolat recalled that the country’s credit default swap (CDS) premium fell to 217.5 as of Sept. 2, marking the lowest level in the last five months.
He stated that the country is expected to reach an export figure of $282 billion at the end of the year.
Bolat added that annualized services exports rose to $125 billion as of August.
“Compared to $122.5 billion in January, we see an increase of $2.5 billion. Here, too, our target is $128 billion by the end of the year,” he said.
“Despite wars and adverse global developments, all service sectors, including tourism, transportation, education, health, consultancy, information technology, film, and exhibition services, are performing successfully,” Bolat said.
He concluded that annualized goods and services exports totaled $405.3 billion.
At the same time, data shared by the Trade Ministry showed that imports increased 10.5% year-over-year to $28.7 billion in the month.
Surging public debt and rising bond yields in advanced economies are threatening to undo the progress of developing and low-income countries in reining in their own debts, International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned in a new interview with Reuters.
Georgieva said in an interview on the sidelines of a G-20 finance leaders meeting in North Carolina that bond yields are being driven upwards by higher overall debt levels, continued inflation pressures from the still-closed Strait of Hormuz, and competition for capital from AI-related debt issuance.
“This is not just a low-income developing countries problem,” Georgieva said.
“High debt levels in advanced economies, combined with stubborn inflation, could lead to debt service costs going up for everybody, including for the low-income, for the emerging markets and developing economies.”
U.S. government bonds have sold off in recent weeks, pushing the 30-year U.S. Treasury yield to near two-decade highs.
In 2022, the IMF estimated that 60% of low-income countries were in debt distress or at high risk of distress, but Georgieva said this had since eased because of strong fiscal policy reforms with support from international institutions and official creditors.
That progress is now at risk, she added.
“We need to remember that some of the emerging market economies have worked very hard to gain market credibility and compress spreads. That could be erased by a lift in debt service costs, by the increase in yields globally by advanced economies,” Georgieva said.
Nonetheless, she said that debt markets were functioning in an orderly manner and expressed optimism that there was a broad consensus among G-20 finance ministers and central bank governors on improving the G-20 Common Framework for debt restructuring and speeding up relief for countries experiencing debt distress.
Senegal test case on debt
During a G-20 session on sovereign debt restructuring, the IMF announced it had reached a staff-level agreement with Senegal for a $2.2 billion three-year loan package, conditional on Senegal’s seeking Common Framework debt treatment.
The Common Framework was launched during the COVID-19 pandemic in November 2020 to bring official and private creditors together to agree on restructuring crisis-hit countries’ debt.
But it took years to achieve debt workouts for the first two debtor countries, Chad and Zambia, amid disagreements over how any losses would be shared among private creditors, international institutions including the IMF and World Bank, and their largest lender, China.
An improved process agreed to in May aims to streamline debt restructurings by laying out required steps and linking them with an IMF financial support agreement, which also requires a memorandum of understanding with the creditors committee on the main terms.
Georgieva said that if the new process works well and quickly for a Senegal debt workout, it will encourage more countries to seek similar debt treatments.
“We have the next case,” she said of Senegal.
“Let’s make it work, and you can be sure that the fund would be very relentlessly pursuing speedy completion.”
Global stocks and bonds recuperated on Thursday, rallying ahead of the U.S. data and central banker comments that could reinforce investor expectations that the Federal Reserve (Fed) would raise rates later this month.
A recovery in global bonds helped improve sentiment in equities, while the yen powered towards its biggest two-day rally since a boost from official intervention early last month.
Oil reversed earlier losses to rise above $95 a barrel, as uncertainty prevailed over renewed military strikes between the U.S. and Iran.
In Europe, the STOXX 600 rose 0.2%, breaking three days of losses, while U.S. futures were up around 0.1%.
In premarket trading, shares in Broadcom fell around 2% after the company reported fourth-quarter revenue forecasts that fell short of expectations, while shares in Snowflake soared by over 20% after the cloud data platform provider delivered a stronger annual revenue forecast.
Investors’ immediate focus is Friday’s U.S. payrolls report after disappointing private labour data for August.
Fed Board Governor Christopher Waller is due to speak, after New York Fed President John Williams said on Wednesday rising long-term bond yields were a reflection of a solid economy rather than inflation fears, adding that he was still collecting information to drive his next monetary policy decision.
“There is an interpretation about why yields are moving higher – is it good, or bad?
I feel that the negative reasons are more often put forward than the positive reasons. Negative reasons being: too much supply of debt, fiscal risk, geopolitics and, normalization of risk premium because of oil. But it might be that a key reason behind higher yields is simply higher nominal growth,” Lombard Odier chief economist Samy Chaar said.
“If demand is strong and it’s demand that is keeping yields at high levels, it’s quite a good environment for multi-asset portfolios, in the sense that you want to be exposed to profit growth with equities, and you want to be exposed to carry as well, with credit,” he said.
Money markets currently assign a roughly 60% chance of a rate hike from the Fed this month, up from less than 40% a week ago.
Yen set for biggest two-day gain in a month
Sovereign bond yields fell, having hit multi-year highs in the last week as concerns have deepened about tighter monetary policy and deteriorating fiscal conditions.
Benchmark U.S. 10-year yields were down 2 basis points at 4.77%, while 10-year German yields were also down 2 bps at 3.353%.
The dollar index, which tracks the U.S. currency against a basket of six others, fell 0.4%, largely as a function of the push higher in the yen.
Mounting expectations that the Bank of Japan will raise rates sooner rather than later have pushed the Japanese currency up by over 2.5% in the last two days to trade around 156.1, set for its biggest two-day rise since a round of historic U.S.-Japanese intervention in early August.
The euro gained 0.18% to trade around $1.1609, while the pound was up 0.1% at $1.349 and the Swiss franc strengthened to 0.8087 francs, leaving the dollar down 0.5%.
In commodities, the oil price fell for the first time in nearly a week, although investors remained on edge after the U.S. and Iran exchanged their largest barrage of attacks since July, reviving fears of a broader regional escalation in the Middle East.
Brent crude rose for a fourth day, up 1% at $96.62 a barrel. Gold rose 1.1% to $4,434 an ounce. It is now nearly 13% above June’s seven-month lows, as geopolitical uncertainty and concern about the debasement of the U.S. dollar have lured investors back into the market.
The Dutch central bank on Wednesday said it had moved a large part of its gold reserves from North America to vaults in London over the past six months to be better prepared for a potential crisis.
Annual inflation in Türkiye cooled slightly to 31.5% in August, while month-on-month consumer prices advanced 1.84%, official data showed on Thursday.
The annual increase in prices was led by education, health and housing, the data from the Turkish Statistical Institute (TurkStat) showed.
The consumer price index (CPI) was down from 31.75% in July and marked a third straight month of easing in annual consumer prices depite ongoing conflict between the U.S. and Iran and rising prices.
Both figures came slightly below market expectations.
The consumer price index rose 22.07% compared with December 2025, while the 12-month moving average increase stood at 31.79%.
Commenting on the data, Treasury and Finance Minister Mehmet Şimşek said that inflation continued to fall despite seasonal increases in education prices and the impact of the war on fuel prices.
”Core goods inflation fell to its lowest level since November 2020 at 15.9% annually, while annual rent inflation dropped to its lowest level in 46 months,” he said on social media.
“While taking steps to limit the inflationary impact of global price shocks, we are also continuing our structural policies in line with our goal of lasting price stability,” he added.
New U.S. tariffs of up to 100% targeting foreign-made drones and certain components took effect on Thursday as Washington seeks to lower its import reliance in an industry widely dominated by China.
U.S. President Donald Trump signed an order setting out the duties in August, as the White House flagged “the national security threat posed by imports of drones and their components.”
The order also aims to boost domestic supply chains.
Drones with a takeoff weight exceeding 25 kilograms (55 pounds), as well as those with thermal imaging capabilities and docking stations, face a 100% tariff.
Smaller drones face a 25% duty.
Some components of drones that are “not particularly sensitive” will also face duties, but those only come into effect on Feb. 9 next year.
China expressed opposition to the planned tariffs shortly after they were unveiled by Trump, with Beijing urging Washington to withdraw the duties.
A commerce ministry spokesperson said the tariffs would “disrupt the global drone supply chain and further undermine a fair and competitive market environment.”
He said China firmly opposed the move.
Chinese company DJI, which was founded in 2006, has captured more than two-thirds of the global drone market in recent years, according to several studies.
Since 2022, however, DJI has been on a U.S. list of Chinese firms linked to the country’s military and subject to restrictions on access to U.S. technology.
DJI has fought its inclusion on the list.
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