VW ‘back on track’ as profit jumps, chief says

Carmaker ‘needs to transform’ as it deals with lawsuits from emissions scandal, CEO says

WOLFSBURG, GERMANY— Volkswagen AG sought to draw a line under the diesel scandal that has locked it in crisis mode for more than a year, with sweeping restructuring efforts starting to take hold and profitability improving at the namesake auto brand.

Still, chief executive officer Matthias Muller acknowledged that emissions lawsuits will continue to preoccupy the carmaker for “many years to come,” even as the main VW marque’s return to profit in the fourth quarter underscored Mueller’s optimism that the company is “back on track.”

“There’s no question that the consequences of the diesel crisis hurt us last year, not only in financial terms,” Muller said at the annual press conference in Wolfsburg, Germany. “But we kept on course and put up one of our best operating performances in spite of it all.” All told, Volkswagen has set aside € 22.6 billion ($32 billion) since its emissions cheating became public in September 2015 to pay for fines and a massive global recall of tainted engines. The VW nameplate, which is bearing the brunt of the crisis fallout, has been trying to speed up its recovery by streamlining operations and reducing jobs. The measures are only slowly feeding through due to repeated clashes between workers and managers.

Operating profit at the VW brand amounted to € 625 million ($894 million) in the final three months of 2016, turning around from a loss of € 127 million ($181 million) a year earlier, Volkswagen said Tuesday. While cost cuts and record sales helped lift the profit margin to 2.2 per cent from 1.6 per cent earlier in the year, that’s still a far cry from the marque’s goal of 4 per cent by 2020.

VW was one of the industry’s least efficient carmakers even before the scandal hit, and has been under pressure to reduce capital expenditures. It announced a labour deal last year to cut costs by € 3.7 billion ($5.38 billion).

“Volkswagen needs to transform, not because everything in the past was bad, but because our industry will see more fundamental changes in the coming 10 years than over the past 100,” Muller said. “It was clear to me from day one that we need to seize this decisive turning point to realign Volkswagen for the future.”