Winterkorn gets honorary PhD. He deserves it
Despite a severe contraction of its European home market, Volkswagen today announced record earnings for 2012. The group delivered an after tax profit of €21.9 billion ($28.9 billion) up from €15.8 billion ($20.9 billion) in the preceding year.
The after tax result “includes the clearly positive effects from the final measurement of the put/call rights relating to Porsche as of July 31, 2012,” as Volkswagen says. However, an operating profit of €11.5 billion ($15.2 billion) isn’t half bad. Insiders expected a hit on the operating results due to alleged predatory dumping in Europe, but it wasn’t the case.
Maybe it was. Sales rose from €159.3 billion ($210.5) in 2011 to €192.7 billion ($254.6) in 2012. The operating profit on the other hand remained relatively flat, going from €11.3 billion in 2011 to €11.5 billion in 2012. As long as you can afford being a predator, go for it.
What is even more interesting is the guidance Volkswagen gave today: “Given the pressures resulting from the difficult environment the Volkswagen Group’s goal for operating profit is to match the prior-year level in 2013. Deliveries to customers and sales revenue are to increase year-on-year.“
| January – December | 2012 | 2011 | +/- (%) | ||||
| Volkswagen Group (IFRSs): | |||||||
| Deliveries to customers | ‘000 units | 9,276 | 8,265 | 12.2 | |||
| Vehicle sales | ‘000 units | 9,345 | 8,361 | 11.8 | |||
| Production | ‘000 units | 9,255 | 8,494 | 9 | |||
| Employees | Dec. 31 | 549,763 | 501,956 | 9.5 | |||
| Sales revenue | EUR million | 192,676 | 159,337 | 20.9 | |||
| Operating profit | EUR million | 11,510 | 11,271 | 2.1 | |||
| Profit before tax | EUR million | 25,492 | 18,926 | 34.7 | |||
| Profit after tax | EUR million | 21,884 | 15,799 | 38.5 | |||
| Noncontrolling interests | EUR million | 168 | 391 | -57 | |||
| Profit attributable to shareholders of Volkswagen AG | EUR million | 21,717 | 15,409 | 40.9 | |||
In spite of my doubt about their plans for world domination, good for them. They’re doing something right.
These seem like good figures, but I note number of employees increased by slightly more (9.5%) than production (9%). I would have thought through economies of scale and productivity that they could increase production by a greater amount than the increase in the number of employees. Obviously not much of an issue when you are making large profits.
If a 9% increase in employees adds enough value to the product to increase sales over 20% and/or reduces the cost of production to increase after-tax profits by over 38%, they’re contributing far more than the cost of their labor. You can’t go wrong when you spend another four bucks to make an additional five bucks. The in-house tax accountants are doing their job turning a 20% increase in revenue into a 38.5% increase in net profit.
Maybe the extra employees are for new product development, such as the 300 mpg thing they just announced. I wouldn’t get excited about modest head count changes; that happens all the time.
They have almost 550000 employees? I never would have guessed that. How many do GM and Toyota have worldwide?
So far no problems with my Golf wagon after 7600 miles, so hopefully it continues that way. Seems like they have improved quality and squeaks and rattles are non-existent at the moment for me. However, squeaks and rattles are a different story in my wife’s 2000 Jetta TDI.
GM has 207,000 direct employees worldwide, but their joint venture partners are not included. Toyota has about 325,000 worldwide excluding their Chinese joint venture partners. Volkswagen may seem high, but Toyota is exceptionally lean, and GM had far more employees before bankruptcy eliminated a huge chunk of their capacity by dumping it into “old” GM, and previously spinning off parts divisions like AC-Delco.
The stock is getting hammered this morning. So naturally I picked some up :D
I hate to see PSA turn into a house of cards, but VAG’s success to partially due to the other’s loss. I’m glad their quality/reliability is improving, but I don’t see a reason to buy a GTI over a Subaru BRZ.
The GTI has a rear seat that doesn’t require amputation? :p
looks like they saved a bundle on 4 for 1 at Mens’ Warehouse.
Cutting corners!
The operating profit is only half of the total profit. Where is the other half? From manipulating their own stocks?
Technically it would be from Investing and Financing activities, which are probably more complex in that company than most, with their weird cross-ownership structures.
The item that has me baffled is a positive cash flow of almost EUR 33B, with some EUR 10B of that invested in plants and equipment — and yet net liquidity is down by EUR 6B.
I guess I need to wait two weeks for the complete financials to be published.
I’m also curious as to whether they will have written down their 19.9% investment in Suzuki …
You shouldn’t judge by appearance, and maybe it was my upbringing, but I looked at the picture and my skin crawled. Seriously. There ain’t a one of those guys I’d want to see on my front porch. You guys just stay in Germany building cars and making money, K?
Look like a group of Middle Aged German men to me.
Their quality has definitely improved. 70,000 miles on my daughters 08 Rabbit and 16,000 on my 12 Sportwagon TDI and no malfunctions, squeeks, or rattles on either of them. They are both way more fun to drive, and can carry more stuff than their competitors, which why I bought them.
I hope they don’t get caught up in selling the most. We don’t need another gm on our hands.
I much prefer fords method. They produce what people will buy and they sell it at a price that makes them a good decent profit. They are not out to sell the most.
On a side note the focus has sold a crap ton around the world.
Ford is languishing outside NA and is currently ranked 7th Globally. VW’s massive profit in a downmarket is something to be pleased with.
I agree. But, i think VW is doing it the wrong way. At the same time they need to watch out for coming drops. It will take quite awhile for the European car market to get back, if it ever does.
Ford may be down but that doesn’t really bother me. I think they are handling their spot well by closing European plants.
They do keep adding jobs here in the us as they push up close to max capacity.
They sacrificed quality to achieve these results. Not impressed.
How they can make a record profit is an enigma.
Expensive simple looking cars with low quality.
@Buckshot,
They sell a lot more than “cars” and in areas of fairly high profit.
Maybe now those guys can get some suits that fit.
And yeah, what Buickman said.
You sure can get a lot of honorary degrees just by saying “yes” to Ferdinand Piech. Which, as it has turned out, has been a pretty good thing for Winterkorn to do. Piech inherited a company that was really only good at creating jobs for Germans and turned it into what is by nearly any measure the most successful automobile manufacturer the world has known, often by building incredibly good cars. If that takes them to the top in volume, great … but I think we’ve seen plenty of examples of what chasing volume for its own sake accomplishes.