Slump in profits for VW
Lawsuits and recalls hit German firm’s finances
German automaker Volkswagen saw net profit fall 19 per cent in the first three months of the year as it struggled to deal with a costly scandal over cars equipped to cheat on diesel emissions tests.
The company also faced plummeting sales in Russia and Brazil due to those countries’ troubled economies.
Profits for the January-March period fell to 2.37 billion euros (Dhs9.75 billion) from 2.93 billion euros (Dhs12 billion) a year earlier.
Revenue fell 3.4 per cent to 50.96 billion euros (Dhs208billion) due in part to exchange rate effects.
Earnings and profit margins slipped at luxury brand Audi, one of
the German company’s major money-makers.
Operating profit eased to 1.3 billion euros (Dhs5.3 billion) from 1.4 billion euros (Dhs5.73 billion) a year earlier.
Things were better at the company’s Porsche brand. Operating profits, which exclude financial items such as interest and taxes, rose 14 per cent.
The sports car and luxury SUV division turned in a fat profit margin of 16.6 per cent, up from 15.1 per cent.
Sales fell 35 per cent in Russia, which has seen its currency plummet along with the price of oil.
Volkswagen, based in Wolfsburg, faces heavy costs recalling and fixing cars that are equipped with engine-control software that could detect when a car was on a test stand and turned off the emissions controls during everyday driving.
CEO Matthias Mueller said the company “managed to limit the economic effects of the diesel issue and achieve respectable results under difficult conditions.”
The company set aside 16.2 billion euros (Dhs66.3) from its earnings last year to deal with recalls and other costs.
VW has reached a tentative agreement in federal court in San Francisco with US authorities, who first uncovered the cheating, to buy back or repair some 500,000 vehicles.
Volkswagen, the U.S. Department of Justice and attorneys for Volkswagen owners have until June 21 to file a final settlement with the court.