Slump in prof­its for VW

Law­suits and re­calls hit Ger­man firm’s fi­nances

7 Days in Dubai - - BUSINESS -

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.

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