Volkswagen's financial performance is suffering this year under the combined weight of the strong euro versus the dollar, high product development costs and reduced demand. Volkswagen isn't hedged on the euro-dollar exchange rate to the extent that Porsche and DaimlerChrysler are, so the movement of the rate has hit VW margins on its US sales quickly. The VW line though is that there will be no price increases in the US to compensate (and that would be difficult to make stick, anyway). With macroeconomic fundamentals not pointing to any realignment of that exchange rate anytime soon, the second half's financial results are unlikely to bring much cheer. And on the product side, the all-important Golf V doesn't really impact until 2004. European and US market conditions don't look like helping much this year either. Pischetsrieder and pals could be forgiven for wishing to see the back of 2003.