VW shifts focus to profit as 10 million sales goal almost met

German automaker Volkswagen will reinforce steps to boost earnings in coming years as its long-planned target to increase sales to over 10 million cars a year is almost met.

Group sales were up 4.7 per cent in the first two months of 2014 at 1.47 million autos, excluding heavy trucks, making it likely Volkswagen will reach its 10 million goal outlined in 2007 this year, four years earlier than originally planned, chief executive Martin Winterkorn said.

But operating profit at the multibrand group edged up only 3.5 per cent in the past three years to €11.7 billion ($16.27 billion) in 2013, held back by spending on technology and models, while sales surged 24 per cent to €197 million. “We’re now focusing more strongly on qualitative goals,” Mr Winterkorn said at VW’s annual press conference.

“More than ever before, our objective is qualitative growth.”

Wolfsburg-based VW has used resilient profits to boost investment during a European recession that plunged French and Italian peers into the red.

But generating cash to fund global expansion is getting harder as VW balances rising short-term costs, such as €4.6 billion in 2013 negative currency effects, with upgrades and additions to a fleet of more than 310 models.

The push for greater efficiency at Europe’s largest automotive group echoes a call by the chief executive last month on senior managers to keep costs down at VW as the company prepares for another year of tough market conditions.

VW toned down its guidance for 2014 operating profit on February 21st, saying EBIT may only improve if economic conditions, especially in Europe where VW sells about 40 per cent of its vehicles, improve more than expected.

To boost margins, the carmaker is increasingly counting on the gradual adoption of its new MQB modular platform for a wide range of cars.
– (Reuters)