Volkswagen Is `Satisfied' With Sales on Higher Demand

Berlin May 21, 2005; Jeremy Van Loon writing for Bloomberg reported that-- Volkswagen AG, Europe's largest carmaker, is ``very satisfied'' with sales so far this year and is finding demand for its new models, Chief Executive Officer Bernd Pischetsrieder said.

``We have a large fleet of totally new vehicles on the market, and the new Fox is doing excellent, as are the new Passat and Polo,'' Pischetsrieder said in an interview today on the sidelines of a conference in St. Gallen, Switzerland. ``The reaction to the range is very positive, for Audi as well.''

Volkswagen, based in Wolfsburg, Germany, expects new vehicles such as the Fox small car and the Golf Plus, a roomier version of the Golf compact, as well as revised Polo compact and Passat mid-sized models, to help earnings this year, Pischetsrieder said April 21. Vehicle sales for the group fell 8.4 percent to 1.17 million units in the first quarter.

``The Fox has only gone on sale in the past few weeks, so it's a bit too early to say if it's a success,'' said Adam Jonas, an analyst with Morgan Stanley in London who has an ``underweight'' rating on Volkswagen shares. ``But it's the cheapest Volkswagen you can buy, so given the state of the economy, it could be selling well.''

Pischetsrieder aims to halt a two-year earnings slide by cutting 3.1 billion euros ($3.9 billion) in costs in 2005 after freezing wages in Germany. He has streamlined his management team, reducing the number of board members to six from seven, and hired Wolfgang Bernhard, a former DaimlerChrysler AG executive who fired 26,000 workers at Chrysler, to run the Volkswagen brand.

Outlook

The brand's worldwide loss narrowed in the first quarter to 53 million euros from 71 million euros. The loss at the commercial-vehicles division narrowed to 39 million euros from 88 million euros.

Companywide first-quarter net income almost tripled to 70 million euros from 26 million euros, Volkswagen said April 20. Revenue fell 2.4 percent to 21.1 billion euros.

Volkswagen shares have gained 7.4 percent this year, compared with the 1.8 percent increase in the 8-member Bloomberg Europe Autos Index. The company has a market value of 14.2 billion euros.

``It's not to be expected that a huge boom in demand will suddenly break out in the automobile industry,'' Pischetsrieder said today. ``We expect that the market will stay at its current level and that we'll still be able to grow.''

U.S.

Volkswagen, which posted a 1 billion-euro loss in the U.S. last year, ranks behind eight Asian brands among non-U.S. car brands in the world's largest car market. In 1970, Volkswagen sold more than all Japanese automakers combined in the U.S.

Last year, BMW outsold Volkswagen's namesake brand in the U.S. for only the second time since 1949, according to Woodcliff Lake, New Jersey-based Autodata Corp.

While demand in the U.S. has remained stable for the industry over the past four years, earnings haven't, Pischetsrieder said today. The company's U.S. strategy now ``isn't to reach some sort of volume target but to take a couple of steps back toward profitability,'' he said.

Volkswagen has no U.S. factories. It ships German-made Golf hatchbacks and Passat sedans to the U.S. for sale there and produces some cars, including the Beetle, in Mexico.

The euro has fallen by 3.3 percent against the dollar this year, while steel manufacturers including ThyssenKrupp AG and Arcelor SA have all raised prices, driving up the cost of production for carmakers.