Today's program is a tale of two European economies. Good morning. This is the Marketplace Morning Report from the BBC World Service. I'm Leanna Byrne. Let's start with the worst of times. Volkswagen, a pillar of Germany's manufacturing, is in tough talks with unions over planned job cuts and factory closures. And on top of all of that, it posted a sharp drop in profits last

quarter. And the country's economy has been flatlining. Although growth numbers came in up

two-tenths of a percent today, surprising economic forecasters who expected the economy to shrink

and slip into a technical recession, that's when an economy shrinks in two successive quarters.

Let's speak to Mattai Schmidt,

European Auto's market analyst at Schmidt Automotive Research. Hello.

Hello. Matais, Volkswagen's third quarter profits came out today. They fell sharply. I mean,

it seems like these reductions, even though they're drastic, might be necessary. Yep, definitely necessary. You could go as far to say they've been necessary for the past two decades. And China has been kind of insulating the business

for the past decade or so. And as they say, once China sneezes, the rest of the business

catches are called. And that's precisely what's happened over

the last couple of months. So cuts are definitely needed in order to reassure the business and

keep it on a good footing going forward. Volkswagen's plan includes potential plan closures,

a 10% wage cut. Obviously, this has been met by strong union opposition.

With those negotiations ongoing, what do you think is the likely outcome?

If you look at Volkswagen, there's often a lot of politics surrounding Volkswagen.

So we assume that they've, like a Turkish bazaar, they've started quite high and said they're

going to cut at least three plants. The unions have opposed that and said they're not prepared

to cut any plants. So we expect a middle ground. So perhaps two plants and instead of a 10%

wage cut, pay freeze because the unions are also on the opposing end calling

for a pay rise. Yeah, we assume there's lots of politics and there's probably going to be a middle

ground reached somewhere. Another thing that's happening today, those new EU tariffs and Chinese

made electric vehicles, they come in today, don't they?

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