FRANKFURT — Volkswagen suffered from a massive engine-rigging scandal as profits slumped in the first quarter, but the embattled German auto giant insisted on Tuesday that things were not as bad as they look.
Volkswagen, which owns 12 brands in all, from VW to Audi, Porsche, Seat and Lamborghini, said in a statement that it “put in a solid performance in the first three months” of 2016, despite the so-called dieselgate scandal.
The carmaker, once a paragon of German industry with ambitions to overtake Toyota as the world’s leading automaker, has been plunged into its deepest-ever crisis after it emerged last September that it installed emissions-cheating software in 11 million diesel engines worldwide. The still incalculable costs of the affair — including regulatory fines and legal costs — pushed VW into the red for the first time in more than 20 years last year when it booked a loss of 1.6 billion euros ($1.79 billion) due to the 16 billion euros ($17.87 billion) in provisions it was forced to set aside.
And it is continuing to feel the fallout this year, its first-quarter results showed.
VW’s net profit slumped by 20.1% to 2.31 billion euros ($2.58 billion) in the period from January to March, on a 3.4% decline in sales to 50.96 billion euros ($56.91 billion). Underlying or operating profit rose by 3.4% to 3.44 billion euros ($3.84 billion), meaning the operating return on sales rose to 6.8% from 6.3%.
The number of vehicles sold edged up by 0.8% to 2.508 million units worldwide. In the U.S., where the scandal initially broke, deliveries to customers were down 5.7% in the three-month period.
But the biggest headache for VW appear to be the markets of Brazil and Russia, where sales skidded by 37.6% and 15.5% respectively, as a result of the difficult economic and political situations in those countries.
In western Europe, vehicles sales were up 2.6% and in the key market of China they grew by 6.4%.
CEO Matthias Mueller insisted VW’s performance was solid, given the circumstances.
“In view of the many challenges we’re currently facing, we’re satisfied overall with the start we made into what will undoubtedly be a challenging year,” he said. “We have succeeded in limiting the economic fallout from the diesel scandal and chalk up respectable results in very difficult conditions.”
In view of the first-quarter performances, VW said it was “confirming our forecast for the whole year,” with overall sales set to decline by “up to 5%.” The operating return on sales was projected to come out between 5.5 and 6.5%.
However, investors did not appear to share Mueller’s optimism and VW shares were the biggest losers on the Frankfurt stock exchange on Tuesday, shedding 2.5% to 134.45 euros ($150.15) in an only slightly softer market.
Analysts believed the final costs of the scandal could be much larger.
“We view the provisions of 16.2 billion euros so far to the lower limit,” NordLB analyst Frank Schwope said. “Our estimate for the overall costs is 20-30 billion euros, and that range is more likely to be exceeded than undershot. … We’re maintaining our ‘hold’ rating on the stock.”
By Simon Morgan