VW says profit up 26% on job cuts

Volkswagen AG, Europe's largest automaker, said first-quarter profit rose 26 percent after the company cut jobs in Germany and lured buyers with the new Tiguan compact sport-utility vehicle and an upgraded Audi A4 sedan.

Net income increased to 929 million euros from 740 million euros a year earlier, the Wolfsburg, Germany-based carmaker said in a statement yesterday. Sales advanced 1.4 percent to 27 billion euros.

Chief Executive Officer Martin Winterkorn boosted profit after adding models and cutting the VW-brand workforce in western Germany by 20 percent. The carmaker forecast record sales this year after first-quarter deliveries rose 7 percent to 1.57 million vehicles on demand from China and Brazil.

"VW is showing an ongoing trend of business and efficiency improvement," said Michael Tyndall, an analyst at Nomura Securities in London with a "buy" rating on the stock. "The outlook for the full year remains positive in spite of a tough environment, with management optimistic about the launch of new models and growth in emerging markets."

Volkswagen was trading down 4.25 euros, or 2.2 percent, at 187 euros as of 11:39 am in Frankfurt.

The stock has gained 20 percent this year, giving a market value of 65.6 billion euros. Tyndall said the shares are priced "well above" the company's true valuation because of takeover interest from German sports-car maker Porsche SE.

"We are optimistic about achieving our targets for 2008, even if conditions remain difficult," Winterkorn said in a separate statement, referring to the company's goal of increasing both operating profit and revenue.

Production boost

The CEO plans to introduce 12 models over the next three years, boosting sales to 8 million vehicles. Deliveries surpassed 6 million for the first time last year. Among the new offerings in 2008 are a remake of the Scirocco sports hatchback, a coupe-style Passat and the next generation of the Golf, the company's best-selling model.

"Almost all group brands will launch attractive new models in 2008," Volkswagen said. "For this reason, we are assuming that deliveries will exceed the record levels achieved in the previous year."

Volumes remain strong in China, South America and central and Eastern Europe, with sales rates climbing in Russia and India, the company said.

Earnings before interest and tax, or operating profit, rose 21 percent to 1.31 billion euros in the quarter, according to today's statement.

Shareholder showdown

Volkswagen reported numbers ahead of today's annual general meeting, where Porsche and the German state of Lower Saxony, the largest shareholders, will make competing proposals. The company releases figures by brand and region on April 30.

Porsche, which owns nearly 31 percent of Volkswagen and has plans to take a majority stake, wants shareholders and the German government to do away with the so-called Volkswagen Law, which gives veto power to anyone with a 20 percent holding. Lower Saxony, which owns 20.3 percent, wants to keep the rule. German companies typically give a blocking vote to shareholders with a holding of no less than 25 percent.

Stuttgart, Germany-based Porsche is also locked in a battle with Volkswagen's labor leaders over the allocation of worker seats on the Porsche board.

Agencies

(China Daily 04/24/2008 page16)