By on July 28, 2011

While natural and man-made disasters rattled the globe, Volkswagen, Europe’s largest and by the end of the year most likely the world’s second largest auto manufacturer, reports eye-popping numbers for the first half year of 2011.

Including China, Volkswagen made $13.5 billion in the first half of 2011. How did they pull off that economic miracle?

Volkswagen turned 4.1 million cars into an operating profit of €6.1 billion ($ 8.8 billion). Volkswagen makes an operating profit of 7.8 percent on each car, a surprising number for a high volume manufacturer. Wait, it gets better.

The operating profit does not include the Group’s €1.2 billion ($1.7 billion) share of the operating profit from the Chinese joint ventures, which is up 50 percent. These joint ventures are recognized using the equity method. The put/call options on Porsche Zwischenholding GmbH lifted the numbers further, leaving Volkswagen with a profit before tax for the first half of the year amounting to €8.2 billion ($11.8 billion), up 215.4 percent from 2010, Volkswagen said in an emailed statement.

After paying taxes, Volkswagen retained €6.5 billion (€9.3 billion), up 261.1 percent.  Taking the Chinese results into account, the before tax profit would be €9.4 billion ($13.5 billion), if Volkswagen would be silly enough to pay German taxes on Chinese profits.

Volkswagen sits on a cash pile of €19.4 billion ($27.9), and this after making investments of €6.5 billion ($9.3 billion) and paying €3.3 billion for the trading business of Porsche Holding Salzburg, the increase in the investment in MAN SE, and the investment in SGL Carbon SE.

Volkswagen invested 3.7 percent of sales into property, plant and equipment, its financial plan allows that number to increase to around 6 percent of sales.

While large automakers with high exposure to the U.S. market had to a large degree cease investments into new models and technologies after carmageddon, Volkswagen never did. With the usual 3-5 year time lag, this is beginning to bear fruit and will keep the company in a strong position for the coming years. The modular toolkit system is expected to allow larger brand differentiation at lower cost.

Global market share rose from 11.7 percent in the first half of 2010 to 12.4 percent.

For the rest of the year, Volkswagen expects lower demand in many Western European countries. In Central and Eastern Europe, Volkswagen is forecasting a rise in vehicle sales.  It banks on a continuation of the positive trends in the Chinese and Indian markets, and thinks new vehicle registrations in North and South America to rise.

For the end of the year, Volkswagen expects “significantly higher” sales revenue and operating profit.   expects the Detroit 3 to report Q2 profits of around $4 billion before the nasty one-time charges. It could very well be that when all the numbers are in, Volkswagen made more money in the first half of 2011 than all of Detroit.

Volkswagen’s complete

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12 Comments on “Volkswagen’s 6 Month Profit Likely To Exceed Combined Detroit 3...”


  • avatar
    200k-min

    More signs that we are living in different times when having a lack of over exposure to the N. American market is actually a good thing. And to think this is a company that was offered to Henry Ford after WWII for pennies, of which he declined saying “it wasn’t worth a damn.”

    • 0 avatar
      Robert.Walter

      At the time, HF2 was right, buteven if he had made the investment, it would not have been very likely that he or his troops would have done anything to increase its value.

  • avatar
    Robert.Walter

    Marty would look much cooler if the central medallion in his livery colar were replaced, Run-DMC-like, with a giant blingy VW medallion.

  • avatar
    goacom

    They may be (like GM) over exposed in China. Yeah, China is booming now, but many indications suggest that it is a bubble that is about to burst. Right now, all the major lemmings, VW included continue to expand capacity there in-order to keep up with this market.

    • 0 avatar
      mike978

      They are not over-exposed to China. They have solid positions in mature markets (like Western Europe) and a plan for growth in the US (whether they get to 800,000 is debatable but they will increase on their recent past of around 330,000). Look at the profit figures – $8.8 billion before China. China adds a further $1.7 billion. So even if China disappeared from their perspective they would still have a very large amount of cash to add to their $27billion in the bank. They don`t need to think short term since they could lose billions and still be flush.

  • avatar
    Zackman

    I wonder what will happen when the warranty period of all those cars expire and they all break down at the same time, according to lousy reliability expounded here on TTAC? Then what?

    • 0 avatar
      mike978

      lol, they are not all likely to have issues at the same time. They sold millions of cars three years ago which are now out of warranty and they still make mega money. Even the worst cars on truedelta only have an instance of around 1 issue per year per car (around the 100 number in Truedelta). A 8% profit per vehicle would be $1600 on a $20K car. So that covers some repairs – not all repairs are major engine failure or transmission replacements.

  • avatar
    eldard

    Once Hyundai and Toyota start their massive push towards the BRIC countries (and who’s the delusional moron who included South Africa in this elite group?), even Darth Vader’s EMP powers won’t be able to save VW. :)

    • 0 avatar
      mike978

      I think you over rate Toyota. They have competed in the BRIC countries for years – most of them (the I, R and C parts) are nearer to Japan than Germany.
      Maybe Toyota will compete as well as they do in Europe where after many years and multiple factories they have 4% of the market compared to VW’s 20+%. I think VW might be able to handle the competition. After all $27billion buys a lot!

      • 0 avatar
        eldard

        They concentrated mainly on the US. And 3rd world countries differ from “1st world” Europe where the best selling cars are the likes of Fiesta and Golf.

  • avatar
    Robert.Walter

    If I understand my scan of the article, it would seem that a significant part of this profit is due to financial engineering …

    If so, I would guess that that portion is not really sustainable, or repeatable even…


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