German automaker Volkswagen on Wednesday reported a 42% drop in operating profit in the third quarter.

Operating profit fell to 2.86 billion euros ($3.1 billion), while third quarter sales revenues slipped 0.5% year on year to around 78.5 billion euros.

Vehicle sales fell 8.3% in the third quarter of 2024 compared to the same time period a year earlier, Volkswagen said.

Net liquidity across the Volkswagen Group stood at negative 160.6 billion euros at the end of September 2024, it said. The company’s net liquidity stood at negative 147.4 billion euros at the end of 2023.

Volkswagen on Wednesday said that its results across the first three quarters of the year were impacted by higher fixed costs and restructuring efforts. Operating profit between January and September of this year was 21% lower on an annual basis.

Volkswagen shares were were last 1.8% higher at 8:19 a.m. London time.

Arno Antlitz, chief financial officer and chief operating officer at Volkswagen Group, said the performance reflected a “challenging market environment” and highlighted the importance of ongoing performance programs across the company.

The third quarter results come after Volkswagen last month cut its 2024 annual outlook for the second time in just a few months. At the time, the car maker said it was expecting a profit margin of around 5.6% for the year, along with a 0.7% drop in sales to 320 billion euros. Those figures were left unchanged on Wednesday.

Volkswagen has been in hot water in recent months, warning of potential plant closures in Germany and scrapping a slew of labor agreements with local workers in September. The company also said it would end its employment protection agreement, which has been in place for its German workforce since 1994.

On Monday, the Volkswagen works council said the company’s management was planning widespread pay cuts and layoffs, as well as the closure or size reduction of all of its German plants.

In response, Volkswagen reiterated the need for restructuring and said that it would present plans for work cost cuts during a round of negotiations about the labor agreements, which is also taking place on Wednesday.

“Ahead of the negotiations today, we need to state: the situation is getting more serious,” Volkswagen’s chief negotiator Arne Meiswinkel said on Wednesday according to a CNBC translation.

He added that current developments in the auto industry in Europe and especially in Germany were concerning, as shown by the latest figures from both the company and its competitors.

Meiswinkel reiterated that Volkswagen needed to lower costs and increase its efficiency to be in a position that allows it to invest in its future.