Volkswagen optimistic after hearty profits

Volkswagen (VW), Europe’s biggest car maker, expressed optimism last week about prospects in its current business year after earnings rose sharply last year on cost-cutting and capital gains.

Thanks to a large number of new vehicles scheduled to be launched this year, “we are expecting a slight increase in deliveries to customers in 2007”, VW said in a statement.

“2007 sales revenue will consequently increase year-on-year. We will continue to vigorously drive forward the activities to improve cost structures and processes in 2007. This, along with the steps we undertook in 2006, will lead to a sustainable improvement in our competitiveness,” the car maker said.

In terms of earnings, operating profit in 2007 is projected to exceed last year’s level, VW added.

Last year, net profit more than doubled to €2,75-billion in 2006 from €1,12-billion a year earlier, the statement said. Operating profit before exceptional items jumped by 51,7% to €4,38-billion on an 11,6% rise in revenues to €104,87-billion.


Unit sales advanced by 9,4% to 5,734-million vehicles.

VW explained that earnings were boosted in part by windfall gains from divestments, such as the sale of Europcar for nearly €800-million.

Changes in German corporate taxes also had a positive effect of €951-million, the car maker said.

At the same time, the extensive restructuring measures and deep cost cuts — which cost VW €2,4-billion to implement — also began to pay off.

At the end of 2005, VW embarked on a massive shake-up of its core VW brand, entailing the loss of 20 000 jobs by 2009. It is also planning to downsize the workforce at its Brussels site. At the end of December, VW employed a total of 324 875 people worldwide, about 20 000 fewer than at the end of 2005.

Shareholders would benefit from the sharp rise in profits, with the dividend payout to be increased to €1,25 per ordinary share from €1,15 a year earlier. Holders of preference shares would see their payout increased to €1,31 per share from €1,21.

“We are in a good competitive position thanks to our attractive model range,” VW said. “The large number of new vehicles that we will launch in 2007, in existing and new segments, will extend our product portfolio and further improve our competitive position.” — AFP

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