Europe's largest automaker, Volkswagen, intends on introducing 20 new models by 2011. The rollout is part of a company-wide plan to increase sales by 29%, and deliver 8 million vehicles per year by 2011. These new models are expected to come from all of the automakers brands, but no specifics were mentioned.
According to a company release following a press conference in Germany, 2007 sales revenue across the entire Volkswagen Group increased by 3.8% to €108.9 billion, and earning a pre-tax profit of €6.5 billion - €1.4 billion more than expected. Although many of these gains came from laying off 20% of their Western Germany workers, the continued success of the Volkswagen Golf and the Audi A4 contributed heavily. New introductions, like the Skoda Fabia and the Audi A5 also helped things along as well. Meanwhile, the introduction of the Scirocco at Geneva earlier this month looks very promising for the company. VW hopes to maintain their growth with the new models.
"The [Volkswagen] Group will significantly expand its model portfolio with this product rollout, and will occupy segments such as SUVs, vans and pickups more actively than before," VW said in the release. VW also plans to increase productivity at the company, and reduce labor costs on their top-selling Golf.
Despite profits at VW, Audi, Skoda, and -surprisingly- Seat, the Group is still losing money in North America. Due in part to a record-low Dollar-to-Euro exchange rate, VW is in a weaker position to defend against a Porsche takeover. Porsche has denied rumors of a complete takeover of the Wolfsburg-based Volkswagen Group, but they have confirmed their plans to become the majority owner of VW.
Porsche currently holds 31% of Volkswagen.
VW Chairman Professor Dr. Martin Winterkorn said, “We look forward to even closer cooperation [with Porsche] soon.” Nonetheless, Porsche is currently at odds with Volkswagen's labor unions over the structure of the company's board, and they are fighting with the state government of Lower Saxony. Legislators there are trying to grant the unions power to put a stop to any factory closures there, according to Bloomberg News.
In response to this, Winterkorn was quoted by Bloomberg as saying, "We hope very much that the current dispute between the Volkswagen works council and Porsche will soon be resolved amicably." He continued by stating, "We need clarity. We must deploy our teams and finally start controlling the game together."
- 9.5 Percent return on investment exceeds target
- Further profitable growth expected for 2008
Wolfsburg, 13 March 2008 - The Volkswagen Group reached new records for deliveries, sales revenue and profit last year. “For the Volkswagen Group, 2007 was by far the most successful year in the Company’s history,” said Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen AG, at the presentation of the Company’s 2007 financial results in Wolfsburg on Thursday. “We have impressively demonstrated the unique potential that this Company has to offer. This is also reflected in very concrete form in our key figures.”
Sales revenue grew by 3.8 percent to €108.9 billion, and operating profit more than trebled to around €6.2 billion. At €6.5 billion, the target of €5.1 billion profit before tax originally planned for 2008 was substantially exceeded. “This significant improvement in earnings is a result of the success of our products and our strict cost and investment discipline,” said CFO Hans Dieter Pötsch. With a return on investment of 9.5 percent in the Automotive Division – following 2.1 percent in the previous year – Volkswagen not only earned its cost of capital, but also exceeded its own minimum required rate of return of 9 percent.
The effects of the new model rollout were evident: With around 6.2 million vehicles delivered worldwide, the Group beat the previous year’s figure by 8 percent and set a new all-time record. All eight of the Group’s brands contributed to this growth.
The Board of Management has defined ambitious goals for the future. “We want to deliver 8 million Group vehicles to our customers by 2011,” Winterkorn said. In the coming years, the Volkswagen Group is to be put on an even more international footing. The Group will focus systematically on mobility solutions for individual countries. “We will be tailoring our vehicles precisely to regional customer requirements.” The Volkswagen Group also wants to extend its position in the established markets in Western Europe, Germany and North America.
To accomplish this, more than 20 additional new models will be launched in the period up to 2010. The Group will significantly expand its model portfolio with this product rollout, and will occupy segments such as SUVs, vans and pickups more actively than before.
The new model rollout will be accompanied by a significant increase in productivity, which is expected to rise by around 10 percent a year in automobile production. The “Volkswagen Way” and the continuous improvement process it incorporates are key instruments that the Group will systematically drive forward and use.
Environmental protection remains a top priority for Europe’s largest automobile manufacturer. The Company’s goal is to reduce dependence on finite fuels such as oil and gas. Volkswagen will achieve this, for example, by optimizing its TDI and TSI engines in combination with the innovative direct shift gearbox. At the same time, the Group is conducting research into alternative powertrains such as hybrid engines, fuel cells and plug-in electric drives. At the Geneva Motor Show last week, Volkswagen showcased a Golf TDI hybrid study that uses only 3.4 liters of diesel, with CO2 emissions of 89 g/km.
The Volkswagen Group has also underscored its involvement in the commercial vehicles business by acquiring a majority voting stake in Swedish truck manufacturer Scania AB. “For Scania, this is a historic step towards a clear, long-term shareholder structure. We are committed to Scania and the Scania team. Together, we will harness our market opportunities even more effectively,” the Chairman of the Board of Management said.
Winterkorn also welcomed the announcement that the Supervisory Board of Porsche Automobil Holding SE has endorsed an increase in the company’s shareholding in Volkswagen Aktiengesellschaft: “We look forward to even closer cooperation soon.”
2008 got off to a buoyant start. Deliveries to customers of 952,500. vehicles in January and February exceeded the previous year’s figure by 10.5 percent. Delivery trends for the Volkswagen, Škoda and Volkswagen Commercial Vehicles brands were particularly gratifying.
2007 earnings growth
CFO Pötsch noted that the Group’s sales revenue rose by 3.8 percent in 2007 to around €108.9 billion, while cost of sales only increased by 1.7 percent. Operating profit improved from €2.0 billion to some €6.2 billion. The operating margin rose from 1.9 to 5.6 percent.
The Volkswagen Group recorded a positive financial result on the back of stronger investment income and higher interest and securities income. Profit before tax therefore grew to €6.5 billion (previous year: €1.8 billion). The Volkswagen Group generated profit after tax of €4.1 billion, up from €2.8 billion in the previous year.
Volkswagen wants shareholders, too, to profit from the positive business growth. The Board of Management and Supervisory Board will therefore propose to the Annual General Meeting to increase the dividend to €1.80 (€1.25) per ordinary share and €1.86 (€1.31) per preferred share.
The disciplined management of costs and investments led to a further substantial improvement in liquidity in the Automotive Division. Net liquidity improved by €6.3 billion to €13.5 billion. Net cash flow increased by €1.5 billion to €7.1 billion. The ratio of expenditure on property, plant and equipment (capex) to sales revenue rose from the low level of 3.8 percent in 2006 to 4.6 percent. In the medium term, Volkswagen continues to expect a ratio of capex to sales revenue in the Automotive Division at a competitive level of around 6 percent.
Operating profit by brands and business fields
Pötsch emphasized that “all brands without exception and the Financial Services Division improved their operating profit”. The Volkswagen Passenger Cars brand alone improved its profit by a good €1 billion to €1.9 billion. Audi recorded a 32 percent increase to €2.7 billion, and Škoda posted a 38 percent increase to €712 million.
Volkswagen Commercial Vehicles more than doubled its operating profit to €305 million. SEAT reported an operating profit of €8 million following a loss of €159 million in the previous year. Bentley increased its operating profit by 13 percent year-on-year to €155 million, and Lamborghini also recorded positive earnings growth. The Financial Services Division improved its performance by 14 percent and contributed around €1 billion to the Group’s operating profit.
Outlook
Winterkorn is confident about the rest of the year: As a result of the expected increase in unit sales, the Volkswagen Group’s sales revenue in 2008 will be higher year-on-year. The further optimization of processes and continued systematic cost discipline will also have a positive impact on earnings development. “Overall, we expect the Volkswagen Group’s 2008 operating profit to exceed the 2007 level,” Winterkorn said.
However, there will be no support from global economic growth because expectations are for lower growth rates than in 2007. “The environment we are operating in is not making it any easier for us,” said Winterkorn. “The Volkswagen Group has a medium-term target for return on investment in the Automotive Division of over 10 percent. A condition for this is continued disciplined management of costs and investments,“ according to Pötsch.
Porsche himself created the Volkswagen, then Porsches evolved from it, the companies are intimately tied anyway so does it make a huge amount of difference if Porsche takes VW over?
I don't think it really makes a difference they both probably want to merge for balancing out profits for tax purposes and security in the future that VW and Porsche will be hard to be bought out by any foreign brand, lets say PR of China.
"currently holds 31% of Volkswagen"... READ fool