Volkswagen Group Holds its Own in a Difficult Market Environment

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WOLFSBURG, GERMANY – April 29, 2009: The Volkswagen Group again demonstrated its market strength in the first quarter of the current fiscal year in the midst of a deep recession. “We further increased our global market share in the first quarter thanks to our new model rollout and strong presence in the key sales markets”, said Prof. Dr. Martin Winterkorn, Chairman of Volkswagen Aktiengesellschaft’s Board of Management on Wednesday at the presentation of the interim report. “Of course we, too, are not immune to the crisis. However, with its nine strong brands and sound financial position, our Group is robust. This allowed the Group to reinforce its market position in the first quarter, and that remains our goal for the year as a whole”, he added. Volkswagen had been able to reduce inventories significantly. “This was a major factor in improving our cash flow and liquidity”, noted CFO Hans Dieter Pötsch. “In the current difficult global economic situation, our sustained cost discipline and highly targeted investment activities are more important than ever before. Preserving our financial flexibility remains a high priority”, according to Pötsch.

In the first three months of the year, the Volkswagen Group delivered 1.40 million (1.57 million) vehicles worldwide. Although the overall market contracted by more than 20 percent, the Volkswagen Group only recorded a decline of 10.7 percent, thereby improving its global market share to 11.0 percent (9.7 percent). As planned, the production volume decreased by 24.1 percent year-on-year to 1.25 million (1.65 million) vehicles. With this move, Volkswagen has reduced inventories significantly. Sales revenue declined by 11.2 percent to €24.0 billion (€27.0 billion) in the first quarter due to volume-related factors. Operating profit amounted to €312 million (€1,311 million). The sale of the Brazilian commercial vehicles business contributed around €600 million to this. The Group generated a profit after tax of €243 million (€929 million).

Volkswagen remains committed to key projects
Despite the dramatic collapse in a number of important automotive markets, the Volkswagen Group remains committed to its key projects. For example, €1.2 billion (€1.0 billion) was invested in the reporting period in new production facilities and in models that will be launched in 2009 and 2010. "Our unique, highly efficient range of models is the key to our success. We are not going to make any compromises here because we still have a large number of promising models in the pipeline. And we have the financial basis for shaping our future ourselves", said Winterkorn.

Liquidity increases to more than €10 billion
At €2.6 billion (€0.9 billion), the Automotive Division’s net cash flow in the first quarter rose significantly year-on-year. Automotive Division net liquidity also increased, jumping 33.6 percent to €10.7 billion as of March 31, 2009, compared with €8.0 billion at the end of fiscal year 2008.

Brands and business fields
Recently launched Group vehicles such as the Passat CC, Audi Q5 and Seat Exeo recorded encouraging sales figures. Nevertheless, the business of the individual brands and business fields was considerably impacted by the global financial and economic crisis. The Volkswagen Passenger Cars brand recorded an operating loss of €279 million (operating profit of €461 million) for the period January to March due to a 15 percent drop in unit sales.

Unit sales declined by 17 percent at the Audi premium brand, with operating profit coming in at €363 million (€514 million). The figures for the Lamborghini brand included in the key figures for Audi recorded a satisfactory performance.

At the Škoda brand, an almost 39 percent fall in unit sales and unfavorable exchange rate conditions cut operating profit to €28 million (€182 million).

SEAT recorded a 43 percent decline in unit sales and an operating loss of €145 million (operating profit of €12 million) because of the further worsening situation on the Spanish passenger car market.

The Bentley brand felt the impact of the collapse in sales volume in the luxury segment, and its operating result deteriorated to produce a loss of €52 million (profit of €39 million).

Volkswagen Commercial Vehicles profited from the sale of the Brazilian heavy truck business and generated an operating profit of €528 million (€103 million).

Scania contributed €46 million to the Group’s operating profit for the quarter.

Volkswagen Financial Services again made a significant contribution to the Volkswagen Group's profit, recording an operating profit of €156 million (€276 million).

Strengthening the Group’s competitive position remains the goal
The Board of Management believes that the prospects for the rest of the year are still uncertain, and that the global economic environment will remain tough. Global economic growth in 2009 is likely to be negative. The world’s automotive markets will be especially affected by this development and will decline substantially compared with the previous year.

The Volkswagen Group will be unable to escape this downward trend but, as in the first three months of the year, it will perform better than the market as a whole and further increase its market share during the crisis. "As a successful multibrand Group, we not only have the size needed to achieve this, but also an economic and ecological potential that cannot be matched by any other automaker", said Winterkorn. The Volkswagen Group's sales revenue will be below that of the previous year due to the declining unit sales situation. Rising refinancing costs and a deterioration in the country mix will serve as an additional drag on earnings. In such a situation, the Volkswagen Group will not be able to reach the high level of earnings it achieved in previous years. We expect the Volkswagen Group to close 2009 with a profit.