Volkswagen expected to post steepest quarterly earnings decrease since 2009

Article by Christian Andrei, on October 22, 2012

Even German automakers have fallen victim to the financial difficulties in Europe. Volkswagen is expected to post its steepest quarterly earnings decrease since 2009. Meanwhile, Daimler is reducing costs to aid the decreasing profit at Mercedes-Benz, implying that German automakers aren’t anymore immune to the problems in Europe.

VW, Daimler and BMW have not anymore been able to totally evade the dropping European auto demand by moving cars to China and other markets, as the effects of austerity started to be felt beyond Italy, Spain and Portugal. Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany, said that the European crisis has certainly affected the Germans.

In 2013, as the region\'s market continues to decline, the problems for German manufacturers will begin to really kick in. Volkswagen, which will post its earnings for the third quarter on Oct. 24, is predicted to report an operating profit of 2.3 billion euros ($3 billion) for the period, according to a Bloomberg survey of six analysts. This stands for a 21% drop from the same period in 2011.

This is VW\'s first major profit drop since the 2009 global recession, when earnings declined by over 80%. Until recently, Germany\'s big automakers haven\'t been harmed by the sovereign-debt crisis due to a healthy home market and growth in the U.S. and China. This resilience is weakening as poorer confidence affects German car demand and China becomes sluggish.

While the German carmakers are starting to feel the impact of the economic woes in Europe, they’re still in far better shape than the more narrowly focused European competitors. Talks are ongoing between PSA/Peugeot-Citroen and the French government about a funding lifeline for its financing arm. Meanwhile, Fiat is readying a new plan for its European business to recover. Fiat is estimated to incur losses of 700 million euros in Europe this year.

Topics: vw, earnings

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