The Volkswagen Group again reported record vehicle sales, sales revenue and earnings in 2011 and is confident about its prospects for 2012. “The Volkswagen Group has extended its string of unbroken successes in 2011. We are making steady progress on our way to pole position in the automotive industry”, said Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft, on Monday during the presentation of the Company’s 2011 financial results.

The Volkswagen Group clearly beat its ambitious goals in fiscal year 2011, setting new records for vehicle sales, sales revenue and earnings. The Group made progress both quantitatively and qualitatively: more than 8 million vehicles sold for the first time, the highest product quality and customer and employee satisfaction were coupled with sound finances and a steady increase in profitability. The diverse model portfolio was again expanded by fascinating new vehicles, and the Group occupied new, high-growth segments.

• Sales revenue up 25.6 percent to €159.3 billion
• Operating profit grows by over half to €11.3 billion
• “Strategy 2018” is working – ecological restructuring launched
• Dynamic start to the year – deliveries up 7.7 percent in the first two months
• Growth in deliveries and sales revenue expected for 2012, plus operating profit at high prior-year level

For 2012, Winterkorn is convinced that Volkswagen’s broad global positioning and unique diversity of brands, vehicles and services mean that the Company has what it takes to outperform its competitors. “Our Strategy 2018 is working. We remain on track on our way to the top of the automotive industry”, said Winterkorn.

CFO Hans Dieter Potsch was also satisfied with developments in 2011: “We have further increased our profitability and impressively demonstrated the robustness of our Group.” The Volkswagen Group has established a strong position and its sound finances mean that it is well prepared for the future: “Expanding our production capacity in growth markets will help to reinforce our position there and improve the quality of our earnings.” In light of the still very volatile global economic environment and the associated uncertainty, the Volkswagen Group will systematically continue its strategy of disciplined cost and investment management with a view to further increasing its profitability and thus its competitiveness.

Group figures for 2011

The Volkswagen Group’s sales revenue increased by 25.6 percent in the past fiscal year to €159.3 billion (previous year: €126.9 billion). Consolidated operating profit rose to a record €11.3 billion, an improvement of €4.1 billion compared with 2010. Volume, mix and price effects were the strongest drivers (€5.9 billion). In addition, product cost savings of €1.1 billion had a positive effect. The negative effect of €2.6 billion arising from fixed costs and depreciation and amortization expense was primarily attributable to the Group’s growth and to development costs related to the expansion of the Volkswagen Group’s product portfolio. The operating margin improved from 5.6 percent to 7.1 percent.

The consolidated operating profit does not include the Group’s €2.6 billion (€1.9 billion) proportional share of the operating profit of the Chinese joint ventures. These companies are included using the equity method and are therefore reflected in the financial result, which rose by €5.8 billion to €7.7 billion last year.

All in all, the Volkswagen Group’s profit before tax last year rose by around €10 billion to €18.9 billion. At €15.8 billion (€7.2 billion), the after-tax profit is also a record.

In light of this highly encouraging performance, the Board of Management and the Supervisory Board are proposing to the Annual General Meeting on April 19, 2012 to increase the dividend per ordinary share to €3.00 (€2.20) and the dividend per preferred share to €3.06 (€2.26).

The return on investment in the Automotive Division increased significantly last year to 17.7 percent (13.5 percent), which is both considerably higher than in the previous year and above the Company’s own 9 percent minimum required rate of return. The Financial Services Division improved its return on equity from 12.9 percent to 14.0 percent. “The figures impressively demonstrate that we have systematically increased our operating profitability while maintaining our investment discipline”, said CFO Potsch.

At €17.0 billion (year-end 2010: €18.6 billion), net liquidity in the Automotive Division remained at a high level compared with the previous year. The change includes the acquisition of Porsche Holding Salzburg, the increase in the stake in MAN SE and the equity investment in SGL Carbon SE, totaling some €7 billion, as well as the increase in investments in property, plant and equipment to around €8 billion. “Financially, we are on the right track. Volkswagen entered 2012 with a sound net liquidity position. This continues to give us the necessary financial flexibility for our investments and to implement our Strategy 2018”, said Potsch.

The ratio of investments in property, plant and equipment (capex) to sales revenue rose only slightly by 0.6 percentage points to 5.6 percent. In addition to production facilities, Volkswagen invested mainly in expanding its model range and modularizing its vehicle concepts. “We will continue to invest in our forward-looking product portfolio with prudence and appropriate cost discipline”, underscored Potsch.

Brands and business fields

The Volkswagen Group substantially outperformed the market in the past fiscal year and recorded growth in all key regions, despite being faced with difficult conditions in volatile markets. Group deliveries climbed 14.7 percent to 8.3 million vehicles – surpassing the figure of eight million vehicles for the first time. Thanks to these outstanding sales figures, the Volkswagen Group’s global share of the passenger car market rose from 11.3 percent to 12.3 percent. All Group brands generated a clear increase last year and outperformed the market in most cases.

The Volkswagen Passenger Cars brand is and remains a powerful driver. At 5.1 million cars in 2011, brand deliveries to customers exceeded the five million mark for the first time, a rise of 13.1 percent on the prior-year figure. The brand’s operating profit rose by 74.7 percent to €3.8 billion (€2.2 billion). In addition to the increase in sales, this was mainly due to mix improvements and savings in materials costs.

Audi remained in the fast lane. 2011 was the most successful year in the company’s history, with deliveries of 1.3 million vehicles (1.1 million). Profitability was also at a record high. Operating profit climbed by 60.1 percent year-on-year to €5.3 billion (€3.3 billion). In addition to the better model and country mix and the increase in vehicle sales, Audi benefited from continuous improvements in productivity and processes.

Czech manufacturer SKODA also hit new heights in 2011. Deliveries increased by 15.3 percent to 879,000 vehicles (763,000). The brand recorded substantial growth in Russia, India and China in particular. Operating profit climbed by 66.1 percent to €743 million (€447 million).

SEAT continued to make progress in 2011. At 350,000 vehicles, deliveries to the Spanish brand’s customers were up 3.1 percent on the prior-year figure (340,000). The operating loss narrowed by a substantial €86 million to €225 million thanks to an improved sales performance and optimized materials costs.

The continued recovery of the luxury segment lifted the Bentley brand in 2011. Deliveries increased by 36.9 percent to 7,003 vehicles (5,117). The British brand was back in the black with an operating profit of €8 million (previous year: operating loss of €245 million). The higher volume and mix improvements also had a positive impact.

Volkswagen Commercial Vehicles can also look back on a successful year. Deliveries increased by 21.4 percent to 529,000 vehicles (436,000). Operating profit improved by €217 million to €449 million (€232 million). This was due to higher sales and lower materials costs.

Swedish truck manufacturer Scania increased deliveries by 25.7 percent to 80,100 trucks and busses (63,700). Operating profit rose by 2.3 percent to €1.4 billion (€1.3 billion).

MAN, the commercial vehicles, engines and mechanical engineering company, delivered 24,750 trucks and busses in the period from November to December and generated an operating profit of €193 million. Volkswagen held 59.58 percent of the company’s voting rights and 57.33 percent of its share capital as of December 31.

Volkswagen Financial Services generated an operating profit of €1.2 billion in 2011, up from €932 million in the previous year, again making it a key success driver for the Group. The Division signed 3.1 million new finance, leasing and insurance contracts worldwide, an increase of 16.2 percent compared with the previous year.

Strategy and outlook

“Our Group’s success is built on solid and above all broad foundations” said Winterkorn. The volume goal of ten million vehicles is in sight, the Group’s global market share has risen by 2.7 percentage points since 2007 and its return on sales before tax has climbed from 6.0 percent in 2007 to 11.9 percent last year. Without the nonrecurring effect from the re-measurement of the put/call options relating to Porsche Zwischenholding GmbH, the figure for 2011 would be 7.8 percent. The long-term target is to achieve a return on sales of at least 8 percent.

The Group’s “Strategy 2018” combines business success and financial strength with responsible conduct towards customers, employees, the environment and society. “We want to make Volkswagen the most ecological automaker in the world”, said Winterkorn. To achieve this goal, he said that the Volkswagen Group had launched a fundamental ecological restructuring. The goal is that, by 2015, the Group’s European new vehicle fleet should emit less than 120 grams of CO2 per kilometer for the first time. To achieve this aim, each vehicle generation should be an average of 10 to 15 percent more efficient, while efficiency technologies such as start-stop systems are to be rolled out as a standard in all new models. Production efficiency in the 94 Group plants is to become 25 percent more environmentally friendly by 2018, among other things as a result of €600 million of investments in renewable energy. Winterkorn: “We want to and will make the Volkswagen Group a beacon for the automotive industry.”

On the road to this goal, the Group is cautiously optimistic for 2012 – despite all the economic uncertainties. The Volkswagen Group increased global deliveries by 7.7 percent in the first two months, handing over approximately 1.3 million vehicles (excluding MAN and Scania) to customers. The Volkswagen Group will also be able to approach the coming months with confidence, Winterkorn said. “Above all, because this year, we will again be launching more than 40 additional new models, successors and product enhancements across the Group.” These include important new vehicles such as the Audi A3 and the Golf. “As a result, we expect to increase deliveries to customers year-on-year”, Winterkorn said. 2012 will be dominated by the start of production for new, high-volume models as part of the renewal of the Group’s product range and the need to convert plant and equipment to use with the Modular Transverse Toolkit.

The Volkswagen Group’s 2012 sales revenue will exceed the prior-year figure. This will also be a result of the consolidation of MAN SE as of November 9, 2011; the earnings contribution will be limited because of the write-downs that will be required for purchase price allocation.

The goal for operating profit is to match the 2011 level. Positive effects from the attractive model range and strong competitive position will be offset in part by increasingly stiff competition in a challenging market environment, especially in certain European countries. Disciplined cost and investment management and the continuous optimization of processes therefore remain core components of Volkswagen’s “Strategy 2018”.

- VGoA

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The Volkswagen Group with its Volkswagen, Audi, SEAT and Skoda passenger car brands again grew deliveries in the key accounts business in the first half of 2011. A total of 91,712 vehicles (previous year: 77,122) from Group brands were registered on the relevant fleet market (fleets of ten cars or more), representing an increase of 19 percent.

The Volkswagen brand remains at the top of the German passenger cars brand ranking with 56,329 registrations, an increase of 22 percent. The SEAT brand is particularly successful, with registrations growing 96.5 percent to 2,108 units, while the Skoda brand grew 31.4 percent in the first half year with registrations running at 9,050 vehicles. That makes Skoda the best import brand on the German market.

The model ranking also reflects the Group’s marked success. Volkswagen takes first and second place with the Passat and the Golf. Audi ranks third with the A4.

In the fleet market for light commercial vehicles (maximum 6.0 metric tons), where data are recorded separately, the Volkswagen Commercial Vehicles brand consolidated its clear market leadership during the first half of 2011 with 13,126 vehicle registrations (previous year: 12,979).

“These results show that our customers have confidence in the Group’s first-class product quality and innovative technology. This gives us an incentive to continue meeting our customers’ wishes during the second half of the year with competitive cars and services,” Martin Jahn, Head of Volkswagen Group Fleet International, commented.

- Volkswagen AG

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As planned, the Volkswagen Group can build two further automobile plants in China, continuing its long-term growth strategy in the world’s largest market for passenger cars. During the German-Chinese government consultations in Berlin, final approval was granted today for the plants to be built at Foshan and Yizheng. Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft, today signed appropriate declarations together with the Presidents of the Chinese partner organizations.

• Chinese government approves plans for Foshan and Yizheng
• Planned annual capacity of 300,000 vehicles for each plant

The factory at Yizheng, in Jiangsu Province in eastern China, is to be developed together with partner Shanghai Volkswagen, and the plant at Foshan, in Guangdong Province in southern China, will be built together with the FAW-Volkswagen joint venture. The first documents for the development of the two sites were signed in the summer of 2010. “China is already the world’s largest sales market for automobiles and further substantial growth is expected in the future,” Winterkorn said on the occasion of signing the contracts at the Federal Chancellor’s Office in Berlin. “The Volkswagen Group intends to play a major role in shaping this growth with new environmentally compatible models and the expansion of local production capacity. Our new plants show that Volkswagen remains a strong motor for the Chinese automobile industry.”

Each of the two plants will be designed for an annual capacity of 300,000 vehicles and production is due to start in 2013. “The new factories are a key element in our plans to increase annual production capacity in China to three million vehicles in the medium term together with local partners,” said Dr. Karl-Thomas Neumann, President and CEO of Volkswagen Group China in Berlin.

In view of the dynamic development of the Chinese automobile market, Volkswagen had boosted its investment program for China to 10.6 billion euros for the period from 2011 to 2015. In addition to the two new plants, plans have already been announced to expand production capacity at each of the existing Nanjing and Chengdu plants to between 300,000 and 350,000 vehicles per year.

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The Volkswagen Group scooped up three first places in the “Fleet News Awards 2011” presented by the British trade journal “Fleet News”. The Volkswagen Polo and Golf models and the Skoda Superb took pole position in their respective segments.

• Further rise in fleet new registrations in UK

The “Fleet News Awards” were presented in London for the 23nd time. The jury comprising “Fleet News” editors and trade association members along with representatives from key accounts and automakers judged the vehicles in terms of quality, running costs including residual value and CO2 emissions. The awards were presented in a total of nine categories. The jury awarded first place to the Volkswagen Polo in the “Best Small Car” category and to the Volkswagen Golf in the “Best Lower Medium Car” category. The Skoda brand came first with the Superb in the “Best Upper Medium Car” category.

The UK is Europe’s largest fleet market and is characterized by a high concentration of few customers with very large fleets. Some 3 percent of customers represent roughly 60 percent of total key account business. For 2010 as a whole, the Volkswagen Group with its Volkswagen, Audi, SEAT and Skoda brands grew new registrations in the passenger car fleet market, which covers fleets of 25 or more vehicles, by 10.8 percent to 97,929 vehicles (2009: 88,417) and is therefore the clear market leader.

“The awards confirm that the Volkswagen Group and its brands are excellently positioned to respond to the complex demands of the international fleet business. For us, this achievement is an incentive to continue to meet our customers’ wishes with a balanced and young product range and convincing service,” Martin Jahn, Head of Volkswagen Group Fleet International, said.
- Volkswagen Group

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Volkswagen AG (VOW) will boost production and add models in Brazil to challenge Fiat SpA (F) for the leading position in the country’s rapidly growing auto market.

“Competition in Brazil is intense and we expect it will become even more intense in the future,” Thomas Schmall, head of VW’s Brazilian operations, said in an interview. “We want to further expand our position.”

VW, trailing Fiat in a three-way race with General Motors Co. (GM) for the country’s top spot, is expanding three of five plants in Latin America’s largest economy to increase sales 40 percent to 1 million vehicles in the next four years, he said.

Europe’s largest automaker is investing 2.3 billion euros ($3.3 billion) in Brazil through 2014 as a growing middle class, strong currency and job creation ahead of the 2014 World Cup and 2016 Olympics fuel demand. Auto sales in the country, VW’s third-biggest market after China and Germany, will advance 40 percent by the end of 2016 to 3.64 million vehicles annually, according to industry researcher IHS Automotive.

Fiat leads this year with a 22.3 percent share of the car and light truck market through mid-March, according to data from Brazilian dealers association Fenabrave. Wolfsburg, Germany- based VW is second with 21.8 percent and GM is third with 18.2 percent. VW and Fiat have been trading the top spot back-and- forth, while facing increasing pressure from rivals pouring in to capitalize on the market’s potential.

Increased Investments

“Brazil has never experienced a moment such as the present one, having 45 brands selling their cars here,” said Paulo Sergio Rosa, an automotive consultant from Consultoria Columbia in Sao Paulo. “The math now suggests a subtraction for everyone. VW is making a huge effort to try and get the lead back.”

Fiat, based in Turin, Italy, is spending 10 billion reais ($6 billion) through 2014 to cement itself as the country’s biggest automaker and boost deliveries to more than 1 million vehicles. Brazil is especially important for Fiat because it does not have a strong presence in the other growth markets of China, Russia and India.

“Our profits don’t come from Italy, but from Brazil,” Chief Executive Officer Sergio Marchionne said Feb. 15. Fiat deliveries in the country increased 1.6 percent last year to 761,400 vehicles, generating revenue of 9.25 billion euros, or 25 percent of total sales, according to its annual report.

The VW group, whose revenue in Latin America increased 40 percent last year to 13.5 billion euros, sold 711,500 vehicles, including the Audi luxury brand and commercial-vehicles division, in Brazil in 2010.

Revamped Models

VW will introduce revamped versions of the Passat sedan, Touareg sport-utility vehicle and Jetta compact sedan this year in the country, continuing a roll-out that featured 26 new models or facelifts at the namesake VW brand in 2009 and 2010, Schmall said. The carmaker will lose 2.5 percentage points of market share in Brazil through 2016, according to IHS forecasts.

“I do prefer VW’s cars because my father and my husband have had VW for a long time, but it is a little expensive,” said Andrea Puccini Santos, the 34-year-old owner of a VW Gol, as she looked at offerings at a Sao Paulo dealership. “I am looking at other models with similar prices and cost benefit.”

Strong Pricing

The best-selling car last year in Brazil was the Gol, with deliveries of 293,783 of the hatchback, followed by Fiat´s Uno, with 229,323 sold. The Gol, based on the underpinnings of VW’s Polo, starts at 29,290 reais, while the Uno’s base price is 26,490 reais, according to the carmakers’ Brazilian websites.

“What makes it so relevant for VW, but also for GM and Fiat, to retain share in that market is that the pricing is so strong,” said Guido Vildozo, an IHS Automotive analyst in New York. “A large influx of domestic production in coming years is going to put a lot of pressure on the established manufacturers.”

Brazil’s economy will expand 4.03 percent this year, according to a central bank survey of about 100 economists published this week. Brazilian Central Bank President Alexandre Tombini said March 22 the economy has a “great” medium and long-term growth outlook.

“We’re expecting a positive economic development in coming years,” Schmall said in the March 11 interview. “It’s our goal to share in the growth in auto markets in Brazil and other Latin American countries.”

VW Investments

Volkswagen plans to invest 53.5 billion euros in its global automotive business through 2015, with another 10.6 billion euros to be spent through its two Chinese joint ventures. VW aims to spur sales to more than 10 million vehicles globally to surpass Toyota Motor Corp. as the world’s largest automaker.

Expansion in South America and Southeast Asia is important to VW as a counterweight to the carmaker’s increasing reliance on China, Bernd Osterloh, head of VW’s works council, said in a an interview March 10 in Wolfsburg.

China accounted for 26 percent of VW’s deliveries last year. The carmaker’s operating profit in the country, the world’s biggest auto market, more than doubled in 2010 to 1.9 billion euros.

“Development in China is very good and potential for further growth is no doubt in place,” said Osterloh, who is also deputy head of VW’s supervisory board. “But we as the works council don’t want to become too dependent on China.”

Adjusting Production

Volkswagen may need to adjust production at its Brazilian factories and add models to reap benefits from the country’s economic advance, he said.

“Our capacities are already nowadays running close to limits,” Osterloh said, noting that the commercial-vehicle unit would benefit from an added offering. “We could grow even more with new products.”

Long-time Gol driver Rossana Matheus Montanarini would be open to new offerings.

“This the car I learned to drive with,” the 27-year-old physiotherapist said of the Gol. “But I tested Fox and I saw it‘s very comfortable to drive. I am thinking of cheating on Gol but continuing with Volkswagen.”

- Bloomberg

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