AUTO INSURANCE ARTICLE

Volkswagen First-Quarter Net Falls 74% on Auto Slump

By: AutoInsuranceGuy

Volkswagen AG, Europe’s biggest carmaker, said first-quarter profit slumped 74 percent as the recession eroded sales at units including the Audi luxury brand.

Net income fell to 243 million euros ($314 million) from 929 million euros a year earlier, the Wolfsburg, Germany-based company said in a statement today. Profit was boosted by a 600 million-euro gain from the sale of the truck and bus division in Brazil. Sales dropped 11 percent to 24 billion euros, better than analysts’ estimates.

“That’s a surprise,” said Albrecht Denninghoff, an analyst at BHF Bank AG in Frankfurt who has a “sell” rating on the shares. “The positive result is mainly due to higher proceeds from the truck unit sale. Production cuts certainly helped improve VW’s cash situation.”

Shrinking European and U.S. car markets have prompted Chief Executive Officer Martin Winterkorn to scale back production, reduce staff hours and eliminate its temporary workforce. The maker of Golf and Passat models said March 12 deliveries will drop 10 percent this year from 2008’s record of 6.23 million vehicles. Volkswagen reiterated today that its full-year profit won’t meet the level of previous years.

First-quarter operating profit fell to 312 million euros from 1.31 billion euros a year earlier. Volkswagen had been expected to post a 328 million-euro operating loss, according to the average estimate of three analysts compiled by Bloomberg.

Sales had been projected at 23.7 billion euros, according to the average of seven estimates.

Fox, Polo

Volkswagen rose as much as 5.39 euros, or 2.3 percent, to 242.39 euros and traded at 239.35 euros as of 11:41 a.m. in Frankfurt, valuing the carmaker at 76.3 billion euros.

Volkswagen said today that production of its new “small- family” cars will be based at its Slovakian factory in Bratislava. The decision will help secure 1,500 jobs in the capital city.

First-quarter deliveries fell 11 percent to 1.39 million cars, sport-utility vehicles and trucks, Volkswagen said on April 17.

The company has a 10-year goal of increasing Volkswagen- brand deliveries by 80 percent to 6.6 million vehicles in 2018. Government-backed incentives have spurred sales of Volkswagen’s Fox, Polo and Golf models in Europe, where the brand’s registrations gained 1.6 percent in March.

The carmaker extended its scheduled Christmas break at eight German plants by five days through the first week of January, affecting 54,000 employees, and shut five German factories for four days in February. The company said Feb. 28 that it will drop 16,500 temporary workers worldwide this year. The Audi unit has also suspended production twice this year.

Bentley, Bugatti

Volkswagen-brand global sales fell 4.8 percent to 876,000 cars and SUVs between January and March. Deliveries at Audi fell 11 percent in March to 90,400, the division said on April 6. Volkswagen also owns the Skoda, Seat, Bentley, Bugatti, Lamborghini car brands as well as a commercial-vehicle unit and a majority of Soedertaelje, Sweden-based truckmaker Scania AB.

The introduction of new models such as the sixth-generation Golf and a new-version Polo will allow Volkswagen “to perform significantly better than the competition in 2009,” Detlef Wittig, the company’s sales chief, said on April 17.

Volkswagen’s global presence and its lineup of small, fuel- efficient cars are helping the manufacturer expand market share. While European car sales fell 9 percent in March, group registrations at Volkswagen declined just 0.3 percent as sales of no-frills Skoda models jumped 11 percent, the European Automobile Manufacturers’ Association said April 16.

Source: Andreas Cramer from Bloomburg
Volkswagen First-Quarter Net Falls 74% on Auto Slump