VW Group Reports Large Drop in Profit for Namesake Brand

Overall Group sales revenue down slightly during the first quarter

Kelly LinWriterMay 31, 2016

Volkswagen Group reported that its sales revenue fell 3.4 percent during the first quarter of the current fiscal year. Operating profit climbed to 3.4 billion euros (roughly $3.8 billion), up from 3.3 billion euros achieved during the same time period last year.

This first quarter operating profit contained a number of special items, including currency-related adjustments on the provisions VW had already created to pay for the diesel scandal. If it weren't for these special items, VW says, operating profit would have declined slightly to 3.1 billion euros (roughly $3.5 billion).

Perhaps the biggest news is that VW's namesake brand suffered dramatically during the quarter. Its operating profit, before special items, fell from 514 million euros to just 73 million euros (which is roughly $81 million). Sales revenue and volume remained down.

Audi's profit before special items declined from 1.4 billion euros to 1.3 billion euros ($1.4 billion), and VW Group attributes this drop to exchange rates, spending on new products and technologies, and investments in the automaker's international production network. Bentley recorded a sharp loss of 54 million euros ($60 million) due to slow sales. That's a huge drop from the 49 million euros in profit it recorded a year ago.

Fortunately, it's not all bad news. Porsche performed quite well, recording a healthy bump in operating profit from 765 million euros to 895 million euros ($997 million). SEAT, a Spanish automobile manufacturer owned by VW Group, is "on the path to long-term profitability" with profit rising from 33 million euros to 54 million euros. Czech automobile manufacturer Skoda saw its profit rise by just over 30 percent to 315 million euros ($351 million).

Despite the mixed results, VW isn't getting down on itself. The auto giant declares 2016 will be a "transitional year" for the company.

"In light of the wide range of challenges we are currently facing, we are satisfied overall with the start we have made to what will undoubtedly be a demanding fiscal year 2016. In the first quarter, we once again managed to limit the economic effects of the diesel issue and achieve respectable results under difficult conditions," VW Group boss Matthias Muller said in a statement.

Meanwhile, VW is still working out the details of its post-scandal recovery plan. In its initial settlement plan, VW has agreed to buy back as many as 482,000 cars in the U.S. equipped with 2.0-liter diesel engines.

Source: VW Group

Kelly Lin

When I tell people I write about cars, the most common reply I receive is “Really?” I guess I never strike people as a car type as I drive down the freeway in the right lane going 60 mph in my old SUV. My gripes about driving in city traffic and fast drivers don’t help my case, either. For a time, the only cars I liked were old cars. Not old as in "classic" or "vintage," but as in well-worn. My first appreciation of cars came when I drove a very old Ford pickup. It wasn't perfect: I used a booster seat to reach the gas pedal, and the turn signal once fell off in my hand as I was learning to drive. But the thing I valued most was the memories. It took several years for me to truly become a "car person." Being a long-time writer and an avid reader has helped me develop a healthy curiosity and a desire to know how things work. This has made cars one of the most fascinating points of study for me because they are such intricate machines. I am interested in how cars can reach 200 mph, how they can run on hydrogen, and how they can drive and park on their own. I also enjoy learning how cars can solve problems whether it be in the form of reducing pollution, minimizing traffic, or helping people stay connected on the road. Yes, maybe I’m not a gearhead. Perhaps I’m a car nerd. Either way, I very much enjoy writing about cars and helping people stay in tune with the automotive industry. I wouldn't want to be writing about anything else. And don’t get me wrong: I know how to drool over a hot car. I am fascinated by the Tesla Model S, awed by the Lamborghini Veneno, and am hopelessly obsessed with the Audi R8.

VW Group Reports Large Drop in Profit for Namesake Brand

Kelly Lin

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