While its boardroom may be racked with turmoil amidst the ouster of its long-time chairman, Volkswagen AG managed to salve investors’ concerns a bit with news that its first-quarter earnings rose 19%, to $3.23 billion.
The maker says it was able to cut costs “in the low triple-digit millions” during the January-to-March period, addressing a problem that had begun to worry analysts – and raise concerns within its boardroom. The maker also benefited from the nascent recovery of the European market which is just emerging from its worst downturn in decades.
The numbers reported by the 12-brand Volkswagen Group came in ahead of what industry analysts had forecast and, with the maker forecasting continued growth ahead, it could bode well for the post-Piech era.
On Monday, Volkswagen confirmed that Ferdinand Piech, the chairman of its Supervisory Board, had resigned after failing to win the support of other board members in a dispute over the future of VW Chief Executive Martin Winterkorn. The heir to company founder Ferdinand Porsche, Piech had himself been CEO from 1993 to 2002, and he was the architect of the maker’s aggressive acquisition strategy that brought it such brands as Bentley, Bugatti and Porsche.
Piech had expressed his displeasure with Winterkorn, considered his likely successor as chairman. But the rest of the board sided with the CEO, leading Piech and wife Ursula, also a VW board member, to resign.
(For more on the shake-up at VW, Click Here.)
The German maker had been facing criticism in recent months due to what many analysts had seen as a bloated cost structure. But the latest earnings report indicates VW has aggressively set out to address that challenge, shaving costs during the quarter by more than 100 million Euros, lifting its profit margin from 1.8% to 2.0% — still on the low side among top global automakers.
VW Group sales jumped 10.3% for the quarter, to 52.7 billion Euros, a figure reflecting both higher sales volumes and an improved model mix, as well as benefits from a weakened Euro.
VW gained groun in a number of markets, including China, where it is currently the number one manufacturer, and much of Europe. But it did face problems in several other key markets.
That includes the United States where it has been losing market share. The maker recently announced plans to double the size of its $1 billion assembly plant in Chattanooga, Tennessee, in a bid to tap key U.S. market trends. The factory will soon launch production of the CrossBlue model, one of several new SUVs specifically targeting the States.
(VW goes big with C Coupe GTE concept. Click Here to find out more.)
While VW was helped by the budding recovery of the European market, it did lose ground in Russia, where automotive sales have been halved in the wake of sanctions placed on the country for its role in the Ukrainian crisis. VW also faced trouble in South America.
The Wolfsburg-based maker is maintaining guidance for the rest of 2015, forecast operating margins will come in somewhere between 5.5 and 6.5%, compared to 6.3% in 2014. It also expects to deliver a 4% increase in group revenues after reaching a record 202 billion Euros last year.
The first quarter has so far been a strong one for European makers. Daimler AG this week announced earnings nearly doubled. But among Japanese and U.S. makers, Honda, Ford and General Motors all came in short of expectations for the January-March quarter.
(Honda hammered by recall woes. Click Here for the full story.)