Volkswagen AG: Interim Report January-September 2006

WOLFSBURG, Germany--Volkswagen AG:

Interim Report January-September 2006:

-- Increase in Volkswagen Group operating profit before special items
   of 62.0% year-on-year to EUR 3.0 billion in the period January to
   September 2006, but still below our medium-term Group target

-- Negative one-off effects mainly from restructuring expenses and
   positive one-off factors from the sale of equity investments
   reduced Automotive Division operating profit by a net EUR 1.7
   billion

-- At EUR 628 million, Automotive Division operating profit after
   special items 43.9% lower than in previous year; Financial Services
   operating profit remains at high prior-year level

-- Gain on sale of Europcar in the second quarter reported as profit
   from discontinued operations in the consolidated income statement;
   cash generated by the sale strengthens Automotive Division net
   liquidity

-- Special items reduced consolidated pre-tax profit from continuing
   operations by 7.1% to EUR 937 million year-on-year

-- Consolidated profit after tax rises 76.6% year-on-year to EUR 1.2
   billion (previous year: EUR 0.7 billion), even with an
   above-average tax rate for continuing activities due to substantial
   special items

-- Ratio of investments in property, plant and equipment (capex) to
   sales revenue in the Automotive Division at 3.1% (previous year:
   4.4%)

-- At EUR 8.2 billion, net liquidity in the Automotive Division
   remains at a high level

-- Collective bargaining agreement reached for the restructuring of
   Volkswagen AG's six traditional plants

-- New model initiative successfully continued:

   -- Deliveries to customers worldwide up by 10.3% year-on-year to
      4.3 million vehicles; market share in Germany and Western Europe
      increased

   -- All Group brands record higher year-on-year sales figures;
      Audi, Bentley, Skoda, Lamborghini and Volkswagen Commercial
      Vehicles aiming for full-year delivery records

   -- New models drive significant growth in deliveries to customers
      in the USA (+10.2%) and China (+28.7%)

   -- Volkswagen Eos records strong sales figures in cabriolet segment

   -- Audi S3, S6 and S8 models and the TT Coupe successfully launched
      in the market

   -- SEAT presents the Leon Cupra at the London Motor Show

   -- 12 world premieres of Group models at the Paris Motor Show and
      the IAA Commercial Vehicles

-- Volkswagen acquires 15.06% stake in MAN Aktiengesellschaft as of
   October 3

January-September				2006		2005 *)		+/-	(%)
Volkswagen Group:
Deliveries to customers		'000 units		4,264		3,866		+	10.3
Vehicle sales		'000 units		4,220		3,841		+	9.9
Production		'000 units		4,233		3,897		+	8.6
Employees		Sept. 30/Dec. 31		329,075		344,902		-	4.6
Continuing operations:
Sales revenue		EUR million		77,030		68,912		+	11.8
Operating profit before special items
		EUR million		3,020		1,864		+	62.0
Special items		EUR million		-1,663		-			x
Operating profit after special items
		EUR million		1,357		1,864		-	27.2
Profit before tax from continuing operations
		EUR million		937		1,009		-	7.1
Profit from continuing operations
		EUR million		413		617		-	32.9
Profit from discontinued operations **)
		EUR million		796		68			x
Profit after tax		EUR million		1,209		685		+	76.6
Automotive Division (including allocation of consolidation adjustments between the Automotive and Financial Services divisions):
Cash flows from operating activities
		EUR million		8,995		5,640		+	59.5
Cash flows from investing activities ***)
		EUR million		1,749		3,945		-	55.7
Net liquidity on September 30
		EUR million		8,194		- 30			x
*)	Financial data restated.
**)	Net gain on disposal of the Europcar group and the Europcar´s current profit after tax for January to May 2006/January to September 2005.
***)	Excluding acquisition and disposal of equity investments: EUR 3,287 million (EUR 3,8 69 million).

Despite the difficult economic environment, the most important automotive markets proved to be robust in the first nine months of 2006 and recorded slight year-on-year growth. Although oil prices have recently fallen, we are not expecting any sustained easing of the situation in the energy and commodity markets. In combination with the troubled situation in the Middle East, this will continue to dampen growth. We therefore believe that growth in demand for passenger cars in the USA, Western Europe and Germany will only be moderate in 2006.

We will continue our product rollout in the fourth quarter, thus stabilizing this year's improved market position in Western Europe and Germany. The success of the new models in the US market will be maintained and will bolster our market position there. We continue to expect growth in deliveries to customers in China and South America/South Africa. Consequently we expect overall year-on-year growth in worldwide delivery figures for 2006.

We will achieve our goal of cutting material costs by at least EUR 1.0 billion in 2006. Driven by the higher unit sales and the success of ForMotionplus, full-year operating profit before special items will be higher than in 2005. We expect the Automotive Division to record a positive net cash flow for the full year and an improvement in net liquidity compared with December 31, 2005.

Wolfsburg, October 27, 2006

Volkswagen AG - The Board of Management

(The full interim report is available at "www.volkswagen-ir.de")

This report contains forward-looking statements on the business development of the Volkswagen Group. These statements are based on assumptions relating to the development of the economies of individual countries, and in particular of the automotive industry, which we have made on the basis of the information available to us and which we consider to be realistic at the time of going to press. The estimates given entail a degree of risk, and the actual developments may differ from those forecast.

Consequently, any unexpected fall in demand or economic stagnation in our key sales markets, such as Western Europe (and especially Germany) or in the USA, Brazil or China, will have a corresponding impact on the development of our business. The same applies in the event of a significant shift in current exchange rates relative to the US dollar, sterling, yen, Brazilian real, Chinese renminbi and Czech koruna.

Language: English
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