Four Times Growth Isn't Good Enough for Auto Market Analysts
Just because some automakers are forecasting dark wintry days ahead despite summer being just around the corner,
doesn't mean all manufacturers are suffering. Actually, many of the Asian and some European brands are posting record profits month over month, and while Volkswagen Group isn't quite yet among these record breakers, nor is it even noticeably out of the red, the first quarter of 2006 is definitely looking up.
It's difficult to say if CEO Bernd Pischetsrieder and the rest of Volkswagen AG's executive staff are feeling smug after first quarter results that show that the group's net profit has quadrupled compared the same time last year,
thanks to strong retail sales in a bullish global car market, because the result fell short of what analysts had expected the German automaker would achieve, and therefore its stock fell 3.8 percent to 62.26 euros ($77.82 USD).
Altogether, VW AG's net profit shot up to 327 million euros ($458 million CAD; $411 million USD) from 70 million euros ($98 million CAD; $88 million USD) in Q1 of 2005, while revenue is up some 21 percent to 25.34 billion euros ($35.5 billion CAD; $31.9 billion). How much was it short from expectations? Analysts, surveyed by Dow Jones Newswires, had their sights on an additional 112 million euros ($157 million CAD; $141 million USD), or a total of 439 million euros ($615 million CAD; $552 million USD).
So what went wrong? In a statement, Volkswagen stated that the year started off well: "The most important automotive markets
began 2006 with a positive underlying trend, although the continued risks for automotive demand posed by the economic environment are not insignificant."
Volkswagen seems moderately positive about its future growth: "Overall, we are forecasting a modest increase in global passenger car sales," the statement continued. "We are predicting stable automotive demand in the U.S. and Western European markets, while the German passenger car market is expected to grow slightly from a low basis."
There are at least two ways to look at VW group's Q1 results; 1) a net profit four times higher than the previous year is a great deal better than what some automakers are facing, loss after loss, or 2) with its high number of all-new models Volkswagen AG needs to be tearing up the sales charts now because, as the new core models age, sales will probably subside. Integral to the automaker's recent retail activity is the Volkswagen brand, which has been enjoying an upward bounce in popularity thanks to all-new 2006 Jetta and Passat models, plus, here at home, the completely redesigned Golf (which is soon to be renamed Rabbit), capped off with the sporty GTI version, but VW AG, the parent company, has seen its profits rise in more areas than just its namesake brand.
Just because some automakers are forecasting dark wintry days ahead despite summer being just around the corner,
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| Volkswagen's sales are riding high, but its stock is dropping... go figure? (Photo: Justin Couture, Canadian Auto Press) |
It's difficult to say if CEO Bernd Pischetsrieder and the rest of Volkswagen AG's executive staff are feeling smug after first quarter results that show that the group's net profit has quadrupled compared the same time last year,
 |
| New models have VW Group's sales up, but are analysts right in expecting a wholesale upgrade of its core brand to send sales even higher? (Photo: Rob Rothwell, Canadian Auto Press) |
Altogether, VW AG's net profit shot up to 327 million euros ($458 million CAD; $411 million USD) from 70 million euros ($98 million CAD; $88 million USD) in Q1 of 2005, while revenue is up some 21 percent to 25.34 billion euros ($35.5 billion CAD; $31.9 billion). How much was it short from expectations? Analysts, surveyed by Dow Jones Newswires, had their sights on an additional 112 million euros ($157 million CAD; $141 million USD), or a total of 439 million euros ($615 million CAD; $552 million USD).
So what went wrong? In a statement, Volkswagen stated that the year started off well: "The most important automotive markets
 |
| Thanks to models like its new Passat, Volkswagen is predicting steady growth where others are losing customers. (Photo: Trevor Hofmann, Canadian Auto Press) |
Volkswagen seems moderately positive about its future growth: "Overall, we are forecasting a modest increase in global passenger car sales," the statement continued. "We are predicting stable automotive demand in the U.S. and Western European markets, while the German passenger car market is expected to grow slightly from a low basis."
There are at least two ways to look at VW group's Q1 results; 1) a net profit four times higher than the previous year is a great deal better than what some automakers are facing, loss after loss, or 2) with its high number of all-new models Volkswagen AG needs to be tearing up the sales charts now because, as the new core models age, sales will probably subside. Integral to the automaker's recent retail activity is the Volkswagen brand, which has been enjoying an upward bounce in popularity thanks to all-new 2006 Jetta and Passat models, plus, here at home, the completely redesigned Golf (which is soon to be renamed Rabbit), capped off with the sporty GTI version, but VW AG, the parent company, has seen its profits rise in more areas than just its namesake brand.