Scandal-hit Volkswagen sees profits tumble
FRANKFURT, Germany - German automaker Volkswagen saw net profit fall 19 percent in the first three months of the year as it struggled to deal with a costly scandal over cars equipped to cheat on diesel emissions tests.
The company also faced plummeting sales in Russia and Brazil due to those countries' troubled economies.
Profits for the January-March period fell to 2.37 billion euros ($2.63 billion) from 2.93 billion euros a year earlier, the company said Tuesday. Revenue fell 3.4 percent to 50.96 billion euros due in part to exchange rate effects.
The net profit figure fell short of the 2.44 billion euros expected by analysts surveyed by financial information provider FactSet.
Earnings and profit margins slipped at luxury brand Audi, one of the company's major money-makers. Operating profit eased to 1.3 billion euros from 1.4 billion euros a year earlier. The profit margin fell to 9.0 percent from 9.7 percent in the first quarter of 2015.
Things went better at the company's Porsche brand. Operating profits, which exclude financial items such as interest and taxes, rose 14 percent to 895 million euros. The sportscar and luxury SUV division turned in a fat profit margin of 16.6 percent, up from 15.1 percent.
Sales fell 35 percent in Russia, which has seen its currency plummet along with the price of oil, and 17 percent in Brazil, which is in a deep recession.
Volkswagen, based in Wolfsburg, Germany, faces heavy costs recalling and fixing cars that are equipped with engine-control software that could detect when a car was on a test stand and turned off the emissions controls during everyday driving.
CEO Matthias Mueller said in a statement that the company "managed to limit the economic effects of the diesel issue and achieve respectable results under difficult conditions." The company set aside 16.2 billion euros from its earnings last year to deal with recalls and other costs.
The company has reached a tentative agreement in federal court in San Francisco with U.S. authorities, who first uncovered the cheating, to buy back or repair some 500,000 vehicles. Volkswagen, the U.S. Department of Justice and attorneys for Volkswagen owners have until June 21 to file a final settlement with the court.
The company reaffirmed its forecast for the full year, saying that it expects sales revenue to fall 5 percent for all of this year compared to 2015 and an operating return on sales of 5.0 to 6.0 percent.