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October 28, 2004

GERMANY: Volkswagen quarterly operating profit slumps 23%, net dives 65%

Pricing pressure and currency effects contributed to a 23% fall in quarterly operating profit at Volkswagen AG to €487 million ($US619.6 million) before one-offs, beating the €468 million average forecast in a Reuters poll.

By bcusack

Pricing pressure and currency effects contributed to a 23% fall in quarterly operating profit at Volkswagen AG to €487 million ($US619.6 million) before one-offs, beating the €468 million average forecast in a Reuters poll.

The report said the company stuck to its guidance for 2004 operating profit of €1.9 billion, excluding €400 million in restructuring charges, but said market conditions remained tough.

Reuters said the fall in earnings could reinforce management’s demand for a two-year pay freeze for the 103,000 workers at VW’s six western German plants when the company is meeting with union negotiators on Thursday for a fifth round of crucial wage talks.

VW reportedly said its ForMotion efficiency programme was on track to deliver well over €1 billion in savings, after pitching in more than €850 million in the first three quarters.

Reuters said losses in North America continued to mount but not as much as feared – to €614 million in the nine months from €503 million in the first half. VW had warned of a high risk that second half losses could exceed those seen in the first six months.

Lower deliveries and currency swings meant the contribution of its Chinese joint ventures to nine-month profits fell to €268 million from €466 million in the year earlier.

The VW brand group, which includes Skoda, Bentley and Bugatti, swung to a nine-month loss of €47 million from a profit of €388 million in the previous year due in part to sales incentives. The struggling commercial vehicles division widened its nine-month loss by only €7 million to €159 million from a year earlier, the report added.

Revenues rose 0.8% to over €21.4 billion, while deliveries to customers slid 0.6% to 1.23 million vehicles due entirely to a drop in VW’s domestic German market. Net profit slumped 65% to €76 million.

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