9/3/2016

VWprofitsdown20%afterdieselemissionsscandal|Business|TheGuardian

VW prots down 20% after diesel emissions

scandal
Performance of non-Volkswagen marques limits damage to balance sheet and keeps carmaker on course
to become worlds biggest this year
Julia Kollewe
Tuesday 31 May 2016 11.56BST

Volkswagens prot tumbled nearly 20% at the start of this year as car sales continued to fall in
the wake of the diesel emissions scandal.
The German carmaker made a prot before tax of 3.2bn (2.4bn) in the three months to
March, down from nearly 4bn a year earlier. Revenues were down 3.4% to 51bn due to a
decline in vehicle sales and negative exchange rate eects, the company said.
In April, VW recorded its rst annual loss in more than 20 years for 2015, after more than
doubling the amount set aside to pay for costs related to the scandal to 16.2bn.
The carmaker admitted last September it had installed software to cheat US emissions tests in
11m diesel vehicles. Under a deal struck with the US Department of Justice in December, the
carmaker will buy back almost 500,000 cars and compensate owners. But the company has
said a similar arrangement will not be introduced in Europe, where looser requirements on
diesel emissions mean less work needs to be done on aected vehicles.
Matthias Mller, VWs chief executive, said: In light of the wide range of challenges we are
currently facing, we are satised overall with the start we have made to what will undoubtedly
be a demanding scal year 2016. In the rst quarter, we once again managed to limit the
economic eects of the diesel issue and achieve respectable results under dicult conditions.
VW shares initially dropped as much as 3% in Frankfurt, and were later trading 1.5% lower at
135.90.
VW-branded cars have been worst-hit by the scandal. Operating prots plunged to 73m from
514m a year earlier. The Audi brand fared better, with sales and prots just slightly below last
years levels , while Porsche, the Czech brand koda and the Spanish marque Seat delivered
higher sales and operating prots.
The company stuck to its forecast of a fall of up to 5% in 2016 group revenues compared with
last year, depending on economic conditions particularly in South America and Russia and
exchange rate developments as well as against the backdrop of the diesel issue. It is expecting
a marked decrease in passenger car sales revenues.
Mller said: 2016 will be a transitional year for Volkswagen that will see us fundamentally
realign the group.
Experts said the fact that Volkswagen was still making a prot showed that customers cared
less about the emissions scandal than expected. When the scandal broke, the expectation was
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that the carmaker would struggle to survive.

Prof Christian Stadler at Warwick Business School said: Under the circumstances a 3.2bn
prot is not bad. Although rivals Toyota reported substantially higher prots of 4.5bn that
was aided by a weak yen. But General Motors, the other company competing for the largest car
company spot, had lower prots than Volkswagen.
He said the emissions scandal was costly, but far from life-threatening for Volkswagen. He
reckoned the company would manage the payments to settle numerous lawsuits around the
world, and said the last few months had shown that potential Volkswagen customers dont
care about the environmental issues that much. What they care about is quality and value for
money.
Ana Nicholls, automotive analyst at the Economist Intelligence Unit, said because Toyota and
GM had also seen sales slip, ironically Volkswagen is now on track to become the worlds
biggest vehicle-maker this year.
Ketan Patel, fund manager at EdenTree Investment Management, which does not hold any
shares in VW or any other carmakers, said investors were not impressed. He said the bill arising
from the scandal could rise from 16bn to more than 30bn, and noted that Norwayss
sovereign wealth fund was taking legal action against the company.
While the group may be on its way to becoming the biggest vehicle manufacturer in the
world, it is the shareholders who will be picking up the very large bill, which even if paid, will
not guarantee the future integrity of the brand.
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Topics
Volkswagen (VW) Automotive industry Germany Europe
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