VW's Pedal-to-the-Metal Profits

Posted by: Gail Edmondson on October 26, 2007

VW GTI.jpg
Nine months after a management shake-up at Volkswagen, sales and profit are on a major rebound. And CEO Martin Winterkorn has hardly rolled up his sleeves yet.

VW’s group sales were up 8.2% for the first nine months of 2007, helping Europe’s largest automaker gain market share almost everywhere except in the US. Net profit more than doubled to 2.9 billion euros ($4.1 billion). And CFO Hans-Dieter Poetsch vows full-year operating profit before tax will nearly triple to at least 5.1 billion euros ($7.3 billion), hitting the target set for 2008 a year early. “We are working our way up to improved efficiency and productivity,” says Poetsche — but the good news is that greater efficiency improvements are yet to come.

So far, its Audi and Skoda that are are fueling the biggest gains. The eye-popping numbers from VW’s 9-month results are these: Skoda throttles up its operating margin to 9.1%. That’s nearing Toyota-beating levels — and puts Skoda in the global top tier auto companies by profit. Audi is not far behind, with a solid 7% operating profit for the first nine months — better than BMW. Even the profit-challenged VW brand is starting to get some traction, rebounding to a 2.5% operating margin for the first nine months, after 1.2% last year.

So here’s the 64-million-dollar question: Can the team that brought you Audi and Skoda rev margins at VW to equal those at Toyota (while matching its quality). That’s the game plan. There are plenty of innings ahead. But ex-Audi boss Winterkorn is off to an tire-screeching start.

Reader Comments

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October 26, 2007 2:50 PM

Buying Bentley and Lamborghini was one of the best decisions VW made. Just look at R8.

Scott

October 26, 2007 3:47 PM

Now if they could only turn things around in North America they'd be all set!

Amazed Buyer

November 1, 2007 12:35 PM

VW has reality issues in North America. Very few people are going to spend $37,000 for a Passat. I own a 1999 version that runs fine, but I would not replace it with a new one at that price.

anthony

November 7, 2007 4:33 PM

Volkswagen need 3 products in America...all of which are coming in 2008.
The Jetta TDI
The Jetta sports wagon
The Tiguan.
I think VW will soon have these volume models to increase its sales in the USA.

noz

November 13, 2007 7:33 PM

Seems to me that VW has a number of issues to overcome to 'make it' in our market. #1) is product reliability. #2) Their snobbish condescending dealerships. #3) The lousy accommodations for those stuck waiting for weeks on ende for parts and pieces to be Lufthoffed over the Pond.

Badly fading paint pigments, hardening of 'rubber' seals, degrading of clear plastics (as in headlights), hot-glowing electronics are still with VW rather like stench & harvested cabbage fields.

German arrogance does not cut it in most assembly plants, especially those manned by non-Germans. And there is no last-minute 'adjusting' of poor materials and design. My carefully considered thinking? It is time for the People's Car to die and save a lot of us a lot of additional pain.

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