Status: 03/15/2022 12:56 p.m
After a successful fiscal year, Volkswagen continues to look to the future with confidence. In view of the Ukraine war, however, the forecast is shaky.
Volkswagen CEO Herbert Diess has expressed concern about the war in Ukraine. The situation is very confusing, he himself had “misjudged Putin” and never expected a war in Ukraine.
In principle, Volkswagen supports all political sanctions to bring Russia to the negotiating table, said Diess in an interview with journalists in Wolfsburg. If that ultimately means withdrawing from Russia, then this step could also be necessary.
Annual forecast at risk
Despite the current production stops and the temporary suspension of exports to Russia, Volkswagen is still looking ahead with confidence. According to Diess, the company has improved its resilience in recent years and will also overcome this crisis.
However, if the supply of wiring systems, for which Volkswagen is heavily dependent on deliveries from Ukraine, does not ease within three to four weeks, Volkswagen would have to revise its outlook for the current year, said the VW boss at the presentation of the balance sheet for the past fiscal year. So far, the group is expecting growth of between eight and 13 percent for 2022. The aim is to maintain the already high level of profitability.
For the carmaker, the Russian market, with around 200,000 cars recently sold, is only moderately interesting from an economic point of view. However, Volkswagen has two production sites in Russia. Around 4,000 people work in the Kaluga plant alone. Because of the war, both factories are idle.
Production is temporarily relocated
Volkswagen is currently suffering from the fact that wiring harnesses from the Ukraine are hardly available. According to the CEO, production there is still running at 30 to 40 percent. Volkswagen wants to “maintain this production as long as possible”. Due to the missing cable harnesses, several German factories are idle, including the main plant in Wolfsburg. Diess expects the German locations to start up again “sooner or later”. The VW boss did not want to make any more specific statements today.
In view of the bottlenecks, Volkswagen is temporarily prioritizing production in the USA and China, explained Diess. It is a volume of 50,000 to 100,000 vehicles. As soon as the conflict with Russia eases, production will be brought back.
Higher prices and better mix of models
From an economic point of view, Volkswagen has recently been in a comfortable position despite persistent production bottlenecks. “The group could have sold significantly more vehicles in 2021, but was unable to meet the high demand due to the shortage of semiconductors,” explained VW. But the carmaker was able to push through higher prices. With a drop in sales of six percent, sales rose by twelve percent to 250 billion euros last year. Also thanks to lower fixed costs and the concentration on profitable models, the operating result doubled to 19.3 billion euros.
Global advances
In Europe, the electric car offensive is now paying off, Volkswagen said. Another important earnings factor was the success in remediation on the American continent. In South America, where the carmaker hadn’t gotten anywhere for years and lost a lot of money, the turnaround in earnings was successful. Also in North America – i.e. the USA, Canada and Mexico – the main Volkswagen brand has returned to profitability after a few years. VW boss Diess emphasized at the balance sheet press conference that this year a major focus was on the still weak US business.
Even in its largest market in China, the group is still profitable and in a strong position with a market share of 16 percent. However, the operating result of the joint venture companies in China shrank by 17 percent to 3.0 billion euros.
Porsche remains the most profitable brand
The Group’s business upswing rests on a broad foundation. The commercial vehicle holding company Traton reported today an increase in the operating result without special effects from 135 million euros to 1.6 billion euros. Audi, the group’s biggest earner, doubled its operating profit to 5.5 billion euros.
The sports car manufacturer Porsche expanded its position as the Group’s most profitable brand. Last year, the operating result before special items increased by almost a quarter to five billion euros. Volkswagen continues to consider listing a minority stake in Porsche in the fourth quarter. With proceeds of an estimated 20 billion euros, it would be the largest IPO in history in Germany. The subsidiary Porsche AG should not be confused with the listed VW parent company Porsche SE.