Today's program is a tale of two European economies.

Good morning, this is the Marketplace's 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 the economy shrinks in two successive quarters.

Let's speak to Matais Schmidt, European Autos market analysts at Schmidt Automotive Research.

Hello? Matias Volkswagen's third... and Lestch Schmidt Automotive Research. Hello.

Matias, 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 a cold 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.

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