Volkswagen’s net profit reportedly fell by 58% in 2003 amid price wars in North America and a stronger euro that cut export earnings.

But Associated Press (AP) noted that the results still beat analysts’ expectations and Volkswagen’s share price rose.

Volkswagen said its profit fell to €1.1 billion ($US1.4 billion) from €2.6 billion in 2002 as sales increased a slim 0.2% to €87.1 billion ($112.4 billion).

The profit performance exceeded the forecasts of analysts surveyed by Dow Jones Newswires, who on average expected a profit of €978 million ($1.26 billion). The company’s stock was up 2.7% to €40.37 ($52.33) on the Frankfurt exchange.

AP said that, as expected, the Wolfsburg-based company said it was cutting its dividend to €1.05 ($1.35) per share from €1.30 in 2002. It said it made that decision “taking the fall in earnings into account, but also considering a more positive medium-term earnings expectation.”

Associated Press noted that VW has faced rough conditions in the North American market, where it has been reluctant to match fierce price-cutting from rivals.

Additionally, a stronger euro against the dollar has put pressure on profit margins and shrunk the value of US revenues when converted to euros for earnings purposes.

AP said that VW has resisted US carmakers’ practice of offering incentives such as zero-interest financing, often worth several thousand dollars per vehicle, saying that such practices undermine brand image and hurt customers in the long run by reducing vehicle resale values.

Associated Press said that slower than expected sales of the redesigned Golf, launched in October, have weighed recently on VW shares, which are down 10% since early January, and the company had to resort to offering free air conditioning, an option worth over €1,000, in an attempt to improve sales.

Volkswagen’s statement did not include figures for the fourth quarter of 2003, AP noted.