Bloomberg: VW Profit Plunges 86% on Price Cuts, Audi Sales Decline
10-29-09, 12:50 PM
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Bloomberg: VW Profit Plunges 86% on Price Cuts, Audi Sales Decline
Originally Posted by Bloomberg
Oct. 29 (Bloomberg) -- Volkswagen AG, Europe’s largest carmaker, said third-quarter profit plunged 86 percent as vehicle prices fell and the Audi luxury brand’s deliveries declined in western Europe.
Net income fell to 172 million euros ($255.3 million), or 43 cents a share, from 1.21 billion euros, or 3.02 euros, a year earlier, Wolfsburg, Germany-based Volkswagen said today on its Web site. Sales declined 10 percent to 26 billion euros.
Volkswagen, which is taking over Porsche SE’s automotive operations, reiterated a target of increasing global market share as government incentives and Chinese economic growth help keep sales of cars, sport-utility vehicles and vans about level with 2008 figures. The drop in third-quarter revenue contrasted with an 8.9 percent gain in deliveries.
“The size of the profit slump is dreadful, and shows that Volkswagen is overly focused on quantity, not quality,” said Hans-Peter Wodniok, an analyst at Fairesearch in Frankfurt with a “sell” recommendation on the company’s stock. The “pronounced disparity” between revenue and deliveries shows “unit sales seem to be the sole parameter.”
Volkswagen rose 2.32 euros, or 2.1 percent, to 112.48 euros in Frankfurt trading. That pared the stock’s drop this year to 55 percent, valuing the carmaker at 40.5 billion euros.
Analysts had predicted net income of 173 million euros, according to the average of seven estimates compiled by Bloomberg. Sales were estimated at 26.4 billion euros.
Sticking to Forecast
The carmaker will report another “clear” profit in the fourth quarter Chief Financial Officer Hans Dieter Poetsch said on a conference call, reiterating a forecast that full-year earnings and revenue won’t reach the level of previous years.
“Although we assume that the Volkswagen group will be unable to escape the downward trend in most markets, we believe that it will perform better than the market as a whole and will be able to gain additional market share during the crisis,” Volkswagen said.
Detlef Wittig, Volkswagen’s sales chief, said on Oct. 20 that deliveries would probably match figures for 2008, when the company delivered a record 6.23 million cars and sport-utility vehicles. VW had been predicting a decline for 2009, saying on Aug. 7 that deliveries would fall 5 percent.
Reducing Inventories
Volkswagen generated an “order bank” of 500,000 vehicles from the German government’s subsidies of purchases of new cars in exchange for trade-ins of decade-old models for scrap, Wittig said on the call. The carmaker also scaled back inventories to 780,000 cars last month from 1.2 million units in December 2008, helping raise net liquidity to 13.4 billion euros, he said.
Nine-month Chinese sales surged 37 percent because of economic-stimulus measures while global deliveries at Volkswagen’s namesake brand, including the Golf and Polo compacts, rose 23 percent last month. The Volkswagen brand’s European sales in September rose 15 percent, while Audi’s fell 23 percent.
Audi, whose models include the A4 sedan and TTS Roadster, delivered 7.5 percent fewer vehicles in the first nine months of the year, led by a 13 percent decline in western Europe. The global drop was held back by a 20 percent gain in China.
‘Very Difficult Year’
Chief Executive Officer Martin Winterkorn said on Oct. 8 that 2010 will be “a very difficult year” and predicted global auto markets won’t return to pre-recession levels until 2013 at the earliest. The German market, Europe’s biggest, may shrink to as low as 2.7 million vehicles next year from an estimated 3.7 million units in 2009, according to Joachim Schmidt, head of sales at Daimler AG’s Mercedes-Benz Cars division.
Volkswagen aims to buy a 49.9 percent stake in Porsche’s carmaking operations for 3.9 billion euros by the end of the year as the first step in a full merger. Volkswagen Chairman Ferdinand Piech said in September that the carmaker may acquire two more brands after finishing the Porsche takeover. He didn’t identify possible targets.
“It wouldn’t be wise to burden the company further” with additional acquisitions, Poetsch said today in response to questions of whether Volkswagen would seek a majority holding in truckmaking affiliate MAN SE in the fourth quarter or acquire Suzuki Motor Corp.
Volkswagen already owns 29.9 percent of Munich-based MAN. VW is considering a partnership with Suzuki to improve its line- up of small cars, a person familiar with the situation said in June. Winterkorn said in mid-September that Volkswagen isn’t interested in buying the Hamamatsu, Japan-based carmaker.
“It’s true to say there are a lot of opportunities around,” Poetsch said today. “We have our hands full with Porsche,” and raising the stake in the Stuttgart, Germany-based sports-car maker beyond 50 percent soon “is not an option.”
To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net.
Net income fell to 172 million euros ($255.3 million), or 43 cents a share, from 1.21 billion euros, or 3.02 euros, a year earlier, Wolfsburg, Germany-based Volkswagen said today on its Web site. Sales declined 10 percent to 26 billion euros.
Volkswagen, which is taking over Porsche SE’s automotive operations, reiterated a target of increasing global market share as government incentives and Chinese economic growth help keep sales of cars, sport-utility vehicles and vans about level with 2008 figures. The drop in third-quarter revenue contrasted with an 8.9 percent gain in deliveries.
“The size of the profit slump is dreadful, and shows that Volkswagen is overly focused on quantity, not quality,” said Hans-Peter Wodniok, an analyst at Fairesearch in Frankfurt with a “sell” recommendation on the company’s stock. The “pronounced disparity” between revenue and deliveries shows “unit sales seem to be the sole parameter.”
Volkswagen rose 2.32 euros, or 2.1 percent, to 112.48 euros in Frankfurt trading. That pared the stock’s drop this year to 55 percent, valuing the carmaker at 40.5 billion euros.
Analysts had predicted net income of 173 million euros, according to the average of seven estimates compiled by Bloomberg. Sales were estimated at 26.4 billion euros.
Sticking to Forecast
The carmaker will report another “clear” profit in the fourth quarter Chief Financial Officer Hans Dieter Poetsch said on a conference call, reiterating a forecast that full-year earnings and revenue won’t reach the level of previous years.
“Although we assume that the Volkswagen group will be unable to escape the downward trend in most markets, we believe that it will perform better than the market as a whole and will be able to gain additional market share during the crisis,” Volkswagen said.
Detlef Wittig, Volkswagen’s sales chief, said on Oct. 20 that deliveries would probably match figures for 2008, when the company delivered a record 6.23 million cars and sport-utility vehicles. VW had been predicting a decline for 2009, saying on Aug. 7 that deliveries would fall 5 percent.
Reducing Inventories
Volkswagen generated an “order bank” of 500,000 vehicles from the German government’s subsidies of purchases of new cars in exchange for trade-ins of decade-old models for scrap, Wittig said on the call. The carmaker also scaled back inventories to 780,000 cars last month from 1.2 million units in December 2008, helping raise net liquidity to 13.4 billion euros, he said.
Nine-month Chinese sales surged 37 percent because of economic-stimulus measures while global deliveries at Volkswagen’s namesake brand, including the Golf and Polo compacts, rose 23 percent last month. The Volkswagen brand’s European sales in September rose 15 percent, while Audi’s fell 23 percent.
Audi, whose models include the A4 sedan and TTS Roadster, delivered 7.5 percent fewer vehicles in the first nine months of the year, led by a 13 percent decline in western Europe. The global drop was held back by a 20 percent gain in China.
‘Very Difficult Year’
Chief Executive Officer Martin Winterkorn said on Oct. 8 that 2010 will be “a very difficult year” and predicted global auto markets won’t return to pre-recession levels until 2013 at the earliest. The German market, Europe’s biggest, may shrink to as low as 2.7 million vehicles next year from an estimated 3.7 million units in 2009, according to Joachim Schmidt, head of sales at Daimler AG’s Mercedes-Benz Cars division.
Volkswagen aims to buy a 49.9 percent stake in Porsche’s carmaking operations for 3.9 billion euros by the end of the year as the first step in a full merger. Volkswagen Chairman Ferdinand Piech said in September that the carmaker may acquire two more brands after finishing the Porsche takeover. He didn’t identify possible targets.
“It wouldn’t be wise to burden the company further” with additional acquisitions, Poetsch said today in response to questions of whether Volkswagen would seek a majority holding in truckmaking affiliate MAN SE in the fourth quarter or acquire Suzuki Motor Corp.
Volkswagen already owns 29.9 percent of Munich-based MAN. VW is considering a partnership with Suzuki to improve its line- up of small cars, a person familiar with the situation said in June. Winterkorn said in mid-September that Volkswagen isn’t interested in buying the Hamamatsu, Japan-based carmaker.
“It’s true to say there are a lot of opportunities around,” Poetsch said today. “We have our hands full with Porsche,” and raising the stake in the Stuttgart, Germany-based sports-car maker beyond 50 percent soon “is not an option.”
To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net.
10-29-09, 01:06 PM
#4
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Why don't you go to work for the VW organization, FKL? You are just about the most Gung-Ho VW fan I've ever seen......even more than some of their own salespeople. They could probably use you in their PR department. In fact, if you need a character reference on the application, I live just a couple of miles away from their national U.S.-market headquarters here in Herndon, VA, just outside Washington, D.C.
10-29-09, 01:15 PM
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Ouch, trouble for the VW Group. I am sure the Porsche acquisition will not help their profit either. Sad to see that the VW Group is so focused on quantity over quality. They are pulling a GM here, while key competitors like Toyota are refocusing on quality while worrying less about quantity.
10-29-09, 01:31 PM
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10-29-09, 01:38 PM
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Panamera was a great move with styling that is going to turn buyers away. Period. That is a vehicle with supreme engineering, supreme drive, engines, interior wrapped in a ghastly egg. This is coming from a Porsche nut and yes, I've seen it in person.
10-29-09, 02:28 PM
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10-29-09, 02:29 PM
#11
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I'm turned off by the Panamera thing and yes I've seen it in person. I think it's pointless to attempt to make a big sedan look like a rear-engined or mid-engined sports car, and the result is unpleasant.
(btw at nearly 56 inches tall the Panamera is not low like a 911/Boxster/Caymen)
10-29-09, 02:30 PM
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10-29-09, 02:58 PM
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Point is Cayenne sales did their job and brought tons of profit to Porsche, just like the Panamera will, which gives them the funding to develop future generations of cult models like the Turbo, GT2, and GT3 RS.
10-29-09, 03:18 PM
#15
Lexus Fanatic
Agreed Cayenne was a cash cow in it's time, some very nice badge-engineering.
Panamera's sales success remains to be seen. Is it selling like hotcakes so far?