Volkswagen’s profit more than doubles in 2006
These are happy times at Volkswagen after news on Tuesday that it more than doubled its annual profit. Europe’s largest carmaker reported a 58% increase in its overall net profit, earning 2.7 billion euros in 2006 compared to 1.12 billion euros the year before. Strong sales figures and cash gained from selling some units compensated for the costly restructuring expenses.
Volkswagen initiated a restructuring drive under former CEO Bernd Pischetsrieder to parry stiff competition from Asian rivals and gain a bigger share of the US market. This resulted in some 20,000 job cuts that cost the company 2.3 billion Euros, deflating operating profits to just 2 billion - 50% less than the projected 4.3 billion.
Sales grew 11 percent to 104.9 billion euros due to the increased cash flow from the company’s core Automotive business and strong demand for new VW models. Also adding to the profits is the sale of Volkswagen’s Europcar car rental business. Volkswagen sold the firm to French company Eurazio for 1.26 billion euros in March 2006.
Volkswagen is expecting its operating profits for 2007 to perform better than last year on continuing financial restructuring and growing vehicle sales.
