VW Puts Brave Face on Diminishing Returns
Volkswagen, Europe's biggest carmaker, yesterday clung to its forecast of a recovery in profits this year, despite warning that rising raw material prices and the strength of the euro would damage earnings.
The group, which saw pre-tax income slump 19% last year to 1.1bn (£760m), issued an unmistakable profits warning for the current quarter and admitted that the promised recovery would kick in only during the second half on the back of a cost-savings plan and 20 new models.
The VW chief executive, Bernd Pischetsrieder, said that the group did not expect "any dynamic growth or significant changes in the economic environment" and saw difficult trading in Germany, China and the United States.
The group's operating profits - 2bn before special items in 2004 - have been kept afloat by the cost-cutting programme, known as For Motion, which saved 1.6bn last year and is due to bring in 3.1bn in 2005.
But half of this was wiped out by the impact of the weaker dollar and Hans Dieter Poetsch, the chief financial officer, admitted there would be "a further deterioration" in both sales and profits this quarter. In 2004, the weak dollar hit sales by 1.1bn.
VW refused to give any guidance on the likely impact this year - in contrast to Peugeot Citroλn, which expects a hit on earnings of up to 300m through higher steel prices and BMW, which expects one of 100m-plus. Dr Pischetsrieder admitted that January sales in Germany, the group's biggest market, were at their lowest since reunification 15 years ago, and fell 0.5% internationally in the first two months.
Dr Pischetsrieder last year earned 2.63m, including a bonus of 1.8m, according to the group's annual report which, for the first time, published board pay details.
The group, which saw pre-tax income slump 19% last year to 1.1bn (£760m), issued an unmistakable profits warning for the current quarter and admitted that the promised recovery would kick in only during the second half on the back of a cost-savings plan and 20 new models.
The VW chief executive, Bernd Pischetsrieder, said that the group did not expect "any dynamic growth or significant changes in the economic environment" and saw difficult trading in Germany, China and the United States.
The group's operating profits - 2bn before special items in 2004 - have been kept afloat by the cost-cutting programme, known as For Motion, which saved 1.6bn last year and is due to bring in 3.1bn in 2005.
But half of this was wiped out by the impact of the weaker dollar and Hans Dieter Poetsch, the chief financial officer, admitted there would be "a further deterioration" in both sales and profits this quarter. In 2004, the weak dollar hit sales by 1.1bn.
VW refused to give any guidance on the likely impact this year - in contrast to Peugeot Citroλn, which expects a hit on earnings of up to 300m through higher steel prices and BMW, which expects one of 100m-plus. Dr Pischetsrieder admitted that January sales in Germany, the group's biggest market, were at their lowest since reunification 15 years ago, and fell 0.5% internationally in the first two months.
Dr Pischetsrieder last year earned 2.63m, including a bonus of 1.8m, according to the group's annual report which, for the first time, published board pay details.
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