Take the pledge to vote

For a better tommorow#AajSawaroApnaKal
  • I agree to receive emails from News18

  • I promise to vote in this year's elections no matter what the odds are.
  • Please check above checkbox.

    SUBMIT

Thank you for
taking the pledge

Vote responsibly as each vote counts
and makes a diffrence

Disclaimer:

Issued in public interest by HDFC Life. HDFC Life Insurance Company Limited (Formerly HDFC Standard Life Insurance Company Limited) (“HDFC Life”). CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101 . The name/letters "HDFC" in the name/logo of the company belongs to Housing Development Finance Corporation Limited ("HDFC Limited") and is used by HDFC Life under an agreement entered into with HDFC Limited. ARN EU/04/19/13618
News18 » Auto
2-min read

Volkswagen Brand Profit Soars Due to Long-overdue Cost Cuts

Volkswagen is aiming to beat rivals for profitability rather than chasing sales volumes through aggressive pricing as it invests billions of euros in electric cars.

Reuters

Updated:May 3, 2017, 5:37 PM IST
facebookTwitterskypewhatsapp
VW,Volkswagen
Volkswagen logo. (Photo: Reuters)
Loading...

Volkswagen said profit at its troubled core division soared in the first three months of the year, a sign that long-overdue cost cuts are having an impact as the carmaker seeks to move beyond its diesel emissions crisis.

VW is aiming to beat rivals for profitability rather than chasing sales volumes through aggressive pricing as it invests billions of euros in electric cars, new mobility services and self-drive technology.

First-quarter operating profit at VW's largest division surged to 869 million euros ($948.9 million) from 73 million a year earlier, the carmaker said on Wednesday, even as its sales slipped 1.3 percent to 1.44 million vehicles.

Investors have said a turnaround at the VW brand, which has long been saddled with high fixed and R&D costs, is key to turning the German giant into a more attractive business.

Despite the damage to its reputation from the dieselgate scandal, the VW group last year eclipsed Toyota as the world's biggest-selling carmaker.

It is facing cash outflows in the "double-digit billion-euro range" this year to pay for costs of the emissions cheating, CFO Frank Witter said.

The quarterly profit gain reflects VW's improving operating performance and will help the carmaker cushion the financial blow from the scandal. VW has to date set aside 22.6 billion euros to cover the costs of dieselgate including fines and compensation payouts.

Structural changes since the scandal broke in Sept. 2015 include streamlining vehicle development, cutting material costs by reducing complexity in parts, dropping unprofitable models and shifting more power to brands and regions to respond more quickly to market needs.

"Our efforts to improve efficiency and productivity across all areas of the company are also paying off," Chief Executive Matthias Mueller said.

Witter backed that up by saying that the quarterly earnings yielded the "first tangible results" of cost savings.

NEW MODELS

Analysts hope improvements will be sustained as VW renews core models such as the Polo subcompact and Touareg SUV and implements a hard-fought turnaround plan with its unions.

"I can see all sorts of reasons suggesting that profit dynamics will stay high," said Bankhaus Metzler analyst Juergen Pieper who has a "Buy" recommendation on the stock.

The operating margin at VW's core brand jumped to 4.6 percent in the January-to-March period from 0.3 percent a year ago, still lagging French rivals PSA Peugeot Citroen and Renault but nearing its long-term 2025 target of 6 percent.

Group operating profit jumped 40 percent to 4.37 billion euros in the three months to the end of March, one of the carmaker's highest-ever quarterly results, even as vehicle sales at the 12-brand group declined.

Shares were trading down 1 percent at 143 euros as of 0939 GMT as VW stuck to its outlook despite the robust quarterly showing.

The Wolfsburg-based group expects the 2017 return on sales to come in between 6 and 7 percent, after reaching 6.7 percent in 2016, and group revenue to exceed last year's record 217 billion euros by as much as 4 percent.

Quarterly profit at luxury division Audi slipped to 1.2 billion euros from 1.3 billion euros a year earlier as VW's biggest earnings contributor grapples with falling sales in the core Chinese market while pushing new models and technologies.

Don't Miss:

Get the best of News18 delivered to your inbox - subscribe to News18 Daybreak. Follow News18.com on Twitter, Instagram, Facebook, Telegram, TikTok and on YouTube, and stay in the know with what's happening in the world around you – in real time.

| Edited by: Krishna Sinha Chaudhury
Read full article
Loading...
Next Story
Next Story

Also Watch

facebookTwitterskypewhatsapp

Live TV

Countdown To Elections Results
To Assembly Elections 2018 Results