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April 29, 2005

GERMANY: Volkswagen says VW Brand division narrows Q1 loss

Volkswagen's core VW Brand Group narrowed its first-quarter loss as cost-cutting effects from its ‘ForMotion’ cost reduction programme offset declining car sales, Europe's largest carmaker said on Friday, Reuters reported.

Volkswagen’s core VW Brand Group narrowed its first-quarter loss as cost-cutting effects from its ‘ForMotion’ cost reduction programme offset declining car sales, Europe’s largest carmaker said on Friday, Reuters reported.

VW’s sportier Audi Brand Group remained the only profitable industrial division as the commercial vehicles business also reported a loss, albeit a smaller one.

In Volkswagen’s key foreign markets, China and the United States, a mix of harmful currency effects and declining sales led to a further significant deterioration in results.

The carmaker said though that ForMotion helped streamline its high production costs and contributed savings of 684 million euros in the quarter.

The VW Brand Group – which includes the Skoda, Bentley and Bugatti nameplates, as well as the part from the VW marque – reported an operating loss of 53 million euros ($69 million) versus a loss of 71 million a year ago, after a 4.9 percent decline in customer deliveries.
Audi Brand Group, which comprises Audi, Seat and Lamborghini, continued to deliver the bulk of group earnings. Operating profit there rose to 303 million euros from 248 million in the first quarter of 2004.

VW’s Commercial Vehicles unit, which mainly sells light transporters and vans like the Caddy, also posted a narrower loss of 39 million versus 88 million in the previous year.

Last week Volkswagen AG reported that first-quarter profit had almost tripled, ending two years of declines, as a result of cost cuts and increased sales of Audi-brand models.

Volkswagen reportedly doesn’t expect an improvement in car markets “in the short term.” Exchange rates and “uncertainty” about the cost of raw materials, including steel, will put pressure on carmakers, the company said.

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