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VW Group profits jump 40% as cost cuts take effect

First-quarter operating profit hits €4.37bn as carmaker shakes off diesel scandal

Results at Volkswagen were helped by improving cost savings at the German carmaker’s core division. Photograph: Getty Images

Wed May 3 2017 - 07:49

Volkswagen said profit at its troubled core division soared in the first quarter, a sign that long-overdue cost cuts are materialising as the carmaker pushes a post-dieselgate strategic shift.

First-quarter operating profit at Volkswagen's largest division by sales surged to €869 million from €73 million a year earlier, the carmaker said on Wednesday, joining rivals Daimler and BMW which have also reported better-than-expected quarterly results.

Our efforts to improve efficiency and productivity across all areas of the company are paying off

Structural changes since the diesel emissions scandal broke in 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.

Turnaround

Investors have said a turnaround at VW's namesake brand, which traditionally has been saddled with high fixed and R&D costs, is key to turn the German behemoth into a more appealing business, although VW last year eclipsed Toyota as the world's biggest selling carmaker.

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“Our efforts to improve efficiency and productivity across all areas of the company are also paying off,” chief executive Matthias Müller said.

The carmaker’s long-term goal is to lift the brand’s operating profit margin to 4 per cent by 2020 and 6 per cent by 2025 from 1.8 per cent last year, still lagging French rivals PSA Peugeot Citroën and Renault. Group operating profit jumped 40 per cent to €4.37 billion in the three months through end of March, one of the carmaker’s highest-ever quarterly results, even as vehicle sales at the 12-brand group declined – another sign of VW’s accelerating cost-savings drive.

Quarterly profit at luxury division Audi slipped to €1.2 billion from €1.3 billion a year earlier as VW’s biggest earnings contributor is pushing new models and technologies.

– (Reuters)

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