VW Looks to Cut Costs Dramatically to Brace for Diesel Scandal Damages Cash Drain

Volkswagen AG is the biggest automaker in the world but if they don’t stay ahead of the cash drain they will experience from its diesel-cheating scandal, they may not hold that spot for long. As such, the company is pushing to squeeze as many costs as they possibly can from its namesake brand in order to produce a critical earnings lift. So far, the company has seen first-quarter operating profit expand by 7.8 percent revenue, up from 6.8 percent last year.

On Wednesday, then, the Wolfsburg, Germany-based company said that this improved margin will be a major key in cushioning that cash outflow issue. The margin will retain a “double-digit billion-euro range” that should help to cover the cost of damages resulting from the emissions scandal.
Accordingly, Volkswagen AG Chief Financial Officer Frank Witter notes that these quarterly numbers represent the “first tangible results” of the company’s spending discipline, in the wake of the recent crisis. He goes on to say, too, that even amid this particular burden, the company will “continue to fight for every single customer.”

The numbers, then, show that total revenue for this quarter increased by more than 10 percent. That is quite impressive in a time when growth is slow-going, even in the auto industry. In addition, though, the company’s operating margins rose from 6.1 percent last year to 7.8 percent this year.

Indeed, Volkswagen AG chief executive Matthias Müller comments, “Our quarterly figures were positively impacted by the strong performance of the group brands, the launch of new, compelling products and solid earnings in western Europe. Our efforts to improve efficiency and productivity across all areas of the company are also paying off.”
Overall, the VW group sold just shy of 2.5 million cars in this quarter, alone. Now, that may be down 0.5 percent from the year prior, but that was led by a 6.7 sales decline in China. Europe and North America remain VW’s biggest markets and sales in these regions increased 4.4 percent and 6 percent, respectively. Perhaps more importantly, car production increased by 7.1 percent, to 2.74m units.

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