Frankfurt: German carmaker Volkswagen AG said Wednesday net profit plummeted 74% as the world economic crisis cut into demand for its cars and trucks, especially in the US market.
Sales rose however in emerging markets such as China and Russia and in its home market of Germany, thanks to a government program that pays people to scrap old cars and buy new ones.
The Wolfsburg-based company said net profit for the first quarter of this year fell to €243 million ($313 million) from €929 million in the first quarter a year earlier.
Volkswagen, whose full earnings report is due out later this month, said in a surprise announcement that sales fell 11% to €24 billion from €27 billion in the first quarter of 2008.
Europe’s largest car builder said unit sales declined by about 16% in the first three months and that as a result it had scaled back production by about a quarter.
In the first three months it sold 1.35 million vehicles compared with 1.6 million in the year-ago quarter, but the news wasn’t all bad: Volkswagen said deliveries in Germany, China, Brazil, Russia and Poland were higher in the quarter compared to the first three months of 2008.
However, had it not been for gains generated by the sale of Volkswagen’s Brazilian commercial vehicles business to German truckmaker MAN AG, Volkswagen would have posted a loss for the quarter.
The unit sale to MAN added €600 million to operating profit for the quarter, while Volkswagen reported an operating profit of just €312 million in the first three months of 2009. That compares with an operating profit of €1.3 billion in the first three months of 2008.
Volkswagen, whose brands include Skoda, Seat, Bentley and Bugatti, said it was unable to give a detailed outlook due to the volatility of markets, but said it hoped to profit from a number of new model releases during 2009. VW said it assumes it “will be unable to escape the downward trend,” confirming it expects lower sales and earnings in 2009. It said it hoped to counter the negative trend with disciplined cost and investment management and the continuous optimization of its business.
“The Volkswagen group is not immune to the dramatic deterioration in the global business environment,” Chief Executive Martin Winterkorn said in a statement.
“The strengths of our multibrand group prove themselves especially in difficult times: we have increased our global market share thanks to our young and environmentally friendly model range, and are in a sound financial position. Our goal for fiscal year 2009 remains to outperform the market as a whole and to gain additional market share,” Winterkorn said.
Volkswagen said earlier this month its sales drop was most acute in the U.S. where it sold 58,300 cars, down 19.3% from the 72,200 sold in the first quarter of 2008.
In Germany, the company was helped in the first three months by a government car scrapping program, which pays consumers €2,500 if they get rid of their old car for a more environmentally friendly one, which pushed domestic VW sales up sharply. The car scrapping plan has been extended to the end of the year.
Shares of Volkswagen were trading down about 1% at €235 in Frankfurt afternoon trading.