Volkswagen Operating Profit Jumps 17% in Q1

Volkswagen Operating Profit Jumps 17% in Q1
Volkswagen Operating Profit Jumps 17% in Q1

Volskwagen, the German auto giant which recently ousted its chairman Feridnand Piech, has announced increased operating profit in the first quarter on improving European auto demand and cost cutting measures.

Operating profit jumped 17 percent to $3.65 billion, from $3.14 billion a year earlier, VW said on Wednesday, close to the top end of a range of analyst estimates in a Reuters poll and above the forecast average of $3.42 billion.

The operating margin at VW's troubled core autos division edged up to 2 percent from 1.8 percent a year ago, in a sign that Chief Executive Martin Winterkorn's cost-cut drive is bearing fruit.

Underperformance of the namesake brand in markets like the United States and Latin America was one factor leading Piech to provoke a two-week showdown with VW's CEO that ended up forcing the chairman to resign.

"We have always emphasized that 2015 will be a challenging year for the automotive industry as a whole, and also for us," Winterkorn said. "Our key figures show that the VW group remains on course, despite the headwinds."

Quarterly sales of VW-badged cars in high-margin western European markets rose 6.5 percent to 381,600 vehicles, offsetting declines in the United States and even China, a major source of VW profit where the namesake brand achieved double-digit gains in recent years.

The German group stuck to its guidance for the 2015 operating margin to come in a range between 5.5 and 6.5 percent after reaching 6.3 percent last year. VW also still expects group revenue to exceed last year's record $221 billion by as much as 4 percent on continued growth in deliveries.

The growth of VW in China has been the largest issue for the German automaker, with joint projects throughout the East Asian mega-economy producing large profit for the car producer. However, the slowing Chinese economy could be a major issue in the future.