Volkswagen said profit at its troubled core division soared in the first quarter, a sign that long-overdue cost cuts are materialising as the car maker pushes a post-dieselgate strategic shift.
First-quarter operating profit at VW’s largest division by sales surged to €869 million (Dh3.48 billion) from €73m a year earlier, the car maker said on Wednesday, joining rivals Daimler and BMW which have also reported better than expected quarterly results.
Structural changes since the diesel emissions scandal broke in 2015 include streamlining vehicle development, cutting material costs by reducing complexity in parts, dropping unprofitable models and shifting more power to brands and regions to respond more quickly to market needs.
Investors have said a turnaround at VW’s namesake brand, which traditionally has been saddled with high fixed and R&D costs, is key to turn the German behemoth into a more appealing business, although VW last year eclipsed Toyota as the world’s biggest-selling car maker.
“Our efforts to improve efficiency and productivity across all areas of the Company are also paying off,” said the chief executive Matthias Mueller.
The car maker’s long-term goal is to lift the brand’s operating profit margin to 4 per cent by 2020 and 6 percent by 2025 from 1.8 percent last year, still lagging behind French rivals PSA Peugeot Citroën and Renault.
Group operating profit jumped 40 per cent to 4.37 billion euros in the three months through end-March, one of the carmaker’s highest-ever quarterly results, even as vehicle sales at the 12-brand group declined, another sign of VW’s accelerating cost-savings drive.
Quarterly profit at luxury division Audi slipped to €1.2bn from €1.3bn a year earlier as VW’s biggest earnings contributor is pushing new models and technologies.
* Reuters
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