Volkswagen bucks trend with strong profit growth

GERMAN CAR giant Volkswagen bucked the trend of flagging fortunes for European auto firms in the first three months of this year, reporting strong profit growth driven largely by increased sales in Asian and American markets.

Volkswagen Group, the world’s second-largest carmaker, yesterday announced a 26 per cent increase in sales to €47.3 billion. Operating profit rose by 10.2 per cent to €3.2 billion. This does not include a €848 million share of the operating profit of its Chinese joint ventures.

Total sales across its portfolio of brands – which includes VW, Skoda, Seat, Audi, Bentley and Lamborghini – increased by 11.3 per cent to 2.3 million so far this year, with its share of the global passenger car fleet climbing to 12.2 per cent.

Announcing the results Martin Winterkorn, chairman of Volkswagen’s board of management, said that, despite the economic uncertainties, the VW Group was confident about the year ahead.

The firm’s performance contrasts sharply with its European competitors. Without the success of its Chrysler operations, Fiat would have reported a €6 million trading loss for the first three months. In the US, Chrysler Group, run by majority shareholder Fiat, posted its best quarterly profit since its bankruptcy in 2009. Sales rose 33 per cent, driven by increased demand in its home market.

In contrast, the Italian carmaker reported that its loss before interest, taxes and one-time items in Europe nearly doubled to €207 million. Its sales in Europe fell 20 per cent in the first quarter, partly due to a lack of new models on the market.

Meanwhile PSA Peugeot Citröen, Europe’s second-biggest carmaker, announced this week that its sales fell 7.3 per cent to €14.3 billion in the first quarter. Fellow French car firm Renault reported a 9 per cent decline in revenue to €9.54 billion in the quarter.

Sergio Marchionne, chief executive officer of Fiat and Chrysler, is predicting a “painful” restructuring for European carmakers, including plant closures and job cuts, to reduce an estimated 20 per cent excess of capacity in the region.