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

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Bloomberg News said VW’s net income rose to €70 million ($US92 million) from €26 million even though sales fell 2.4% to 21.1 billion euros – the company reiterated full-year profit will rise.


The news agency noted that chief executive officer Bernd Pischetsrieder plans to cut €3.1 billion in costs this year and has frozen wages in Germany to stem the earnings slide – the western European market, where the maker of the Golf and Passat gets more than half its sales, shrank 2.5% in the first quarter, while rebates in the US and competition in China are putting pressure on profit.


“As expected, the most important automotive markets experienced a relatively difficult start to 2005,” the company reportedly said in a statement. “We believe that price pressure will continue unabated.”


Volkswagen’s market share in China, the world’s third-largest vehicle market, fell to 18.9% in the first quarter, from 25.2% at the end of last year, the company’s head of operations in China, Bernd Leissner, told Bloomberg News in Shanghai today.

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The report added that Volkswagen yesterday also said Wolfgang Bernhard will become chairman of the Volkswagen division on May 1, rather than by the end of the year, as the company tries to increase sales and cut costs.


Volkswagen reportedly doesn’t expect an improvement in the 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.


Bloomberg News said Volkswagen’s first-quarter operating profit rose 41% to €464 million, beating an analysts’ consensus of €381.5 million – vehicle sales for the group fell 8.4% to 1.17 million units, while cash flow from operating activities declined 49% to 708 million.