GOLDING’S TAKE: No boasting, very little coasting, at VW
There was a time when VW liked to strut around a bit and emphasise its success relative to the competition. But now that rivals have jobs, and even whole factories on the line at risk, it was sensible and sensitive to concentrate on reporting its own results rather than its results relative to others.
And it wasn’t that there was nothing to boast about. There is plenty. Probably the most telling fact divulged was that unit sales were up 11% compared with last year. On that performance there was an operating profit of nearly 5%. Remarkable.
The only thing that VW could do to remain humble was to remind people that the numbers had still not recovered to the 2007 levels. China, where VW had a head-start, remember, is “still below” pre-crisis levels.
Any sign of recovery anywhere? “North America is growing again but it is very fragile.”
Not so western Europe: “Western Europe is still in mild recession.” In France and Germany the markets are down by over 20%. In the southern countries, recession is more than mild: Greece and Portugal have shown declines of around 40%. Nothing more than “small growth” relative to last year is expected.
In China, the US, Russia and Germany, VW has pushed up its market share.
Worldwide, the group was up by 11% with “nearly all brands doing better than last year.”
Audi is outperforming in the sophisticated markets. Skoda is doing well in price sensitive Russia, China and India. VW’s spread of brands is proving its worth.
New models helped. The Passat Alltrack and the Audi A1 Sportback took the brand into a new segments. Operating profit in the first quarter was boosted from EUR2.9bn to EUR3.2bn with advances in volume, price and mix.
But VW has also become vastly more efficient in designing and building its new ranges. Product cost reduced by a thumping EUR3bn. That helped with cash generation and VW’s finance director has dropped EUR15.8bn of coin into the coffers this year to fund another round of growth.
China is proving to be a honey pot for VW thanks to the years of advantage it has had in manufacturing there and in enlarging market share. VW’s China profit was nearly EUR1bn – double the previous year.
Sometimes it all looks very easy. But on the days that VW’s directors feel that they can coast a little and go early to the pub for lunch, there is the ever-present irritation of Seat. The Spanish patient is still unprofitable. Just as BMW discovered with Rover, car-makers with weak brands always take far longer to turn them around than hopeful adoptive parents first imagine.