Volkswagen profits whiplashed by 'dieselgate' scandal

Volkswagen suffered whiplash from a massive engine-rigging scandal as profits slumped in the first quarter, but the embattled German auto giant today insisted things were not as bad as they look. Volkswagen, which owns 12 brands in all, from VW to Audi, Porsche, Seat and Lamborhgini, said in a statement that it “put in a solid performance in the first three months” of 2016, despite the so-called “dieselgate” scandal.

The carmaker, once a paragon on German industry with ambitions to overtake Toyota as the world’s leading automaker, has been plunged into its deepest-ever crisis after it emerged last September that it installed emissions-cheating software in 11 million diesel engines worldwide.

The still incalculable costs of the affair—including regulatory fines and legal costs—pushed VW into the red for the first time in more than 20 years last year when it booked a loss of 1.6 billion euros due to the 16 billion euros in provisions it was forced to set aside. And it is continuing to feel the fallout this year, its first-quarter results showed.

VW’s net profit slumped by 20.1 per cent to 2.31 billion euros (USD 2.6 billion) in the period from January to March, on a 3.4-per cent decline in sales to 50.96 billion euros. Underlying or operating profit rose by 3.4 per cent to 3.44 billion euros, meaning the operating return on sales rose to 6.8 per cent from 6.3 per cent.

The number of vehicles sold edged up by 0.8 per cent to 2.508 million units worldwide. In the US, where the scandal initially broke, deliveries to customers were down 5.7 per cent in the three-month period.

But the biggest headache for VW appear to be the markets of Brazil and Russia, where sales skidded by 37.6 per cent and 15.5 per cent respectively, as a result of the difficult economic and political situations in those countries.

In western Europe, vehicles sales were up 2.6 per cent and in the key market of China they grew by 6.4 per cent.