VW gets back in high gear
Automaker tops forecasts, showing signs of recovery from diesel emissions scandal
Volkswagen’s first-half earnings exceeded market expectations, sending its shares up the most in three months, as its namesake car brand showed signs of recovering from the emissions-cheating scandal and started to benefit from cost cuts.
Operating profit before special items rose to € 7.5 billion ($10.8 billion) in the first six months of 2016, from € 6.99 billion a year earlier, the German carmaker said in a statement. The first-half figure excluded € 2.2 billion in additional provisions arising chiefly from legal risks in the United States, increasing the total costs of the scandal to more than € 18 billion. “The numbers show a historic record result in the second quarter, and that’s just spectacular considering the headwinds VW faces with declining revenues and all the woes triggered by the diesel scandal,” said Juergen Pieper, a Frankfurt-based analyst at Metzler Bank.
“Efficiency gains at the VW brand seem to be the key driver, and the speed at which this industrial behemoth is changing to achieve this is remarkable.”
The earnings figures, which were released ahead of the full earnings report due on July 28, showed Volkswagen’s operations were recovering, even as the company continues to wrestle with legal fallout from the scandal.
The attorneys general for New York, Maryland and Massachusetts announced lawsuits Tuesday, alleging that the cheating stretches back as far as 1999 and that “top brass” were aware, undercutting Volkswagen’s explanation that the deceit was the work of a small group of employees.
The stock has fallen 7.3 per cent this year, valuing the company at € 65 billion.
The state lawsuits were a blow after Europe’s largest automaker reached a crucial milestone last month by hammering out a $15.3-billion (U.S.) settlement with U.S. authorities.
Chief executive officer Matthias Mueller also presented a strategy for emerging from the crisis by pushing the development of electric car and self-driving features and investing in ride-sharing and other services.
Volkswagen, which has resisted calls from consumer groups and politicians to compensate about 8.5 million affected European customers, stuck to its full-year earnings targets.
The company is predicting that 2016 operating profit before special items will be between 5 and 6 per cent of sales, with revenue down by as much as 5 per cent.
Including special items, first-half operating profit fell to € 5.3 billion from € 6.82 billion a year ago.