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Volkswagen Sees Income Fall in Second Quarter

German maker hit by restructuring costs, slow China sales.

by on Jul.29, 2015

VW's Martin Winterkorn confirmed that being the biggest seller doesn't make you most profitable as the maker's Q2 earnings fell 15.9%.

Being the biggest seller doesn’t bring a guarantee of big profits evidently as Volkswagen AG reported its earnings fell 15.9% during the second quarter of the year.

The fall to 2.73 billion euros from 3.25 billion euros from the same period is the result of 180 million euros in restructuring costs related to its MAN heavy truck unit and a drop in automotive sales in China, where the company is largest automaker.

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“Our results for the first half of the year show that Volkswagen remains very well positioned in an increasingly difficult market environment and has a compelling product range”, said Martin Winterkorn, chairman of the Board of Management of Volkswagen AG, in Wolfsburg. “We are keeping a very close watch on global macroeconomic trends, especially where there are uncertainties such as in the Chinese, Brazilian and Russian markets.”

Volkswagen sold 5.04 million vehicles in the first half of the year, edging past Toyota, which had 5.02 million and General Motors with 4.86 million.

The company’s overall revenue was 56 billion euros, an increase of 9.9% during the quarter. Through the first half of 2015, revenue is 108.8 billion euros compared with 98.8 billion from the same period last year – a jump of 10.1%. However, the euros hitting the bottom line are down during the time: net income is down almost 1% to 5.66 billion euros from 5.71 billion the year previous.

(VW shoots to global number one sales spot. For more, Click Here.)

While the company was hailing its move to the top of global auto sales over Toyota and General Motors through the first half of the year, the second half may prove to be more difficult. The Chinese auto market is expected to continue to soften, which doesn’t bode well for the German maker.

VW has had a variety of factors helping it build momentum. It has scored several hits with new products, such as the seventh-generation Golf that recently was launched into the U.S. market, a year behind Europe and other parts of the world. The maker operates more than a dozen brands, including its most recent car-side acquisition, Porsche.

(VW hammered by sudden slump in Chinese car market. Click Here for more.)

It also faces challenges in the American market where sales have lagged well behind the general industry recovery in recent years. Part of the problem is a lack of new product in a market shifting more and more from passenger cars to crossovers and SUVs. But VW also has been hurt by quality problems that have made many traditional loyalists wary.

Winterkorn also pointed out that the company faces potential problems in other large markets, like Brazil and Russia. That said, the company’s product plans remain unchanged in the second half of this year, he noted.

(VW and Toyota going to war for global supremacy, Click Here for the story.)

“We offer a comprehensive range of attractive, environmentally friendly, cutting-edge, high-quality vehicles,” he said in a statement. “The Volkswagen Group’s brands will press ahead with their new product initiatives in 2015, modernizing and expanding their offering by introducing new models.”

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One Response to “Volkswagen Sees Income Fall in Second Quarter”

  1. Jorge says:

    Cost cutting is how companies pump up the numbers when sales are down. Even with that VW’s earnings are down 15+%.

    In the U.S. their issues are not the lack of SUVs, it’s a systemic issue with unpleasant dealership experiences, outrageously priced replacement parts an unacceptable overall ownership experience in addition to the documented QC issues. VW just doesn’t get it when it comes to the U.S. market and it doesn’t appear they ever will, even after their next SUV shows up to fill the perceived model gap.

    Someone needs to advise the auto companies that being the #1 selling company by volume is not all that it’s cracked up to be, especially when it costs them a lot of customer long term for a short term ego trip.