Volkswagen Group grabs title as most profitable carmaker in 2012

Article by Anita Panait, on March 19, 2013

Although Toyota Motor Corp. managed to reclaim its title as the largest carmaker in the world in terms of sales in 2012, the crown as most profitable vehicle manufacturer globally for the year went to one of its closest rivals – Volkswagen Group. The German carmaker posted an operating profit of around EUR11.5 billion ($15 billion) for 2012, effectively surpassing Toyota’s JPY1.06 trillion ($11.1 billion) and General Motor Co.'s $7.9 billion.

VW is aiming to become the world’s largest carmaker both in terms of sales and profitability by 2018, and it looks like it took Volkswagen Group chief Martin Winterkorn a few years earlier to achieve one of the goals.

When Winterkorn set the targets in 2007, the VW did not seem like a carmaker that could beat the best of the world. By that time, VW it just went through a number of job cuts while its namesake brand was barely breaking even. By that time, Toyota earned around $10 billion more than VW.

Winterkorn made a vow to increase VW’s pretax profit margins to 8% from just 1.7% in 2006. He also vowed to have VW increase its deliveries from 6.2 million vehicles in 2007 to more than 10 million vehicles. Max Warburton, an analyst with Sanford C. Bernstein in Singapore, told Bloomberg News that Winterkorn’s achievement has been “a master class in execution."

Warburton noted that while corporate plans do carry elements of luck, VW was able to do what it said it wanted to do with good products and increasingly competitive prices. However, VW’s leadership position in terms of sales is being threatened by Toyota in 2013. Toyota is making a good recovery since it was plagued by product recalls and natural disasters in 2012, and its profitability for this year could be further boosted if the Japanese yen continues to weaken.

According to estimates compiled by Bloomberg, Toyota is expected to post JPY1.7 trillion in operating profit this calendar year. That may beat analysts' forecasts of EUR13.2 billion for VW, depending on the strength of the yen. At current exchange rates, Toyota could post a profit of $17.9 billion in 2013, compared to Volkswagen's $17.3 billion. The average forecast for GM is $7 billion.

Topics: vw

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