Volkswagen says supply bottlenecks are the new normal
The carmaker’s third quarter earnings stagnated below pre-pandemic levels under the burden of its Porsche listing, the write-off of a self-driving start-up and issues securing parts
28 October 2022 - 11:30
byVictoria Waldersee
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
The Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, US in this April 13 2022 file photo. Picture: REUTERS/BRENDAN MCDERMID
Berlin — Volkswagen said supply bottlenecks were the new norm as its third quarter earnings stagnated below pre-pandemic levels, under the burden of its Porsche listing and the write-off of a self-driving start-up, as well as issues securing parts.
The carmaker lowered its expectations for deliveries this year to be on par with 2021, down from a previouslyforecast 5%-10% rise, but maintained its earnings outlook of hitting the upper end of a 7%-8.5% margin.
“Challenges to our supply chain will become the rule, not the exception,” CEO Oliver Blume said, citing barriers to technology transfers between East and West.
A lack of semiconductors and other critical parts meant the carmaker has 150,000 unfinished vehicles and is stocking up on supplies to protect against further shortages in winter, CFO Arno Antlitz said in an earnings call.
He also said order books were filling up, with some models sold out for 18 months.
Volkswagen reported third-quarter earnings of €4.3bn, following €1.6bn in one-off effects from the suspension of Russian activities and the Porsche listing.
Earnings were boosted by a 19.4% margin in the sports and luxury brands, which are more able to pass on rising costs by hiking prices than volume brands whose buyers are squeezed by inflation.
Volkswagen’s shares fell 2.7% in early trade, underperforming Germany’s DAX, which fell 0.8%.
The results beat last year’s third quarter when chip shortages reduced sales across the auto industry, but they lagged pre-pandemic profits even as luxury carmakers, such as Mercedes-Benz caught up with 2019 earnings this quarter.
Porsche has overtaken its former parent Volkswagen as Europe’s most valuable carmaker following its listing in September.
Volkswagen’s difficulties also included a €1.9bn non-cash impairment charge resulting from the writedown of its investment in Argo , a self-driving start-up it jointly owned with Ford.
Ford and Volkswagen joined forces in July 2019 to share control of the Pittsburgh-based company developing technology for driverless vehicles, which will shut operations.
VW’s initial investment was valued at $2.6bn, including $1bn in cash and the $1.6bn value of Volkswagen’s European self-driving unit, which was absorbed into Argo. VW also bought Argo shares from Ford for $500m.
Both companies shifted spending from the business on Wednesday, dragging Ford into a net loss with a non-cash pretax impairment of $2.7bn.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Volkswagen says supply bottlenecks are the new normal
The carmaker’s third quarter earnings stagnated below pre-pandemic levels under the burden of its Porsche listing, the write-off of a self-driving start-up and issues securing parts
Berlin — Volkswagen said supply bottlenecks were the new norm as its third quarter earnings stagnated below pre-pandemic levels, under the burden of its Porsche listing and the write-off of a self-driving start-up, as well as issues securing parts.
The carmaker lowered its expectations for deliveries this year to be on par with 2021, down from a previouslyforecast 5%-10% rise, but maintained its earnings outlook of hitting the upper end of a 7%-8.5% margin.
“Challenges to our supply chain will become the rule, not the exception,” CEO Oliver Blume said, citing barriers to technology transfers between East and West.
A lack of semiconductors and other critical parts meant the carmaker has 150,000 unfinished vehicles and is stocking up on supplies to protect against further shortages in winter, CFO Arno Antlitz said in an earnings call.
He also said order books were filling up, with some models sold out for 18 months.
Volkswagen reported third-quarter earnings of €4.3bn, following €1.6bn in one-off effects from the suspension of Russian activities and the Porsche listing.
Earnings were boosted by a 19.4% margin in the sports and luxury brands, which are more able to pass on rising costs by hiking prices than volume brands whose buyers are squeezed by inflation.
Volkswagen’s shares fell 2.7% in early trade, underperforming Germany’s DAX, which fell 0.8%.
The results beat last year’s third quarter when chip shortages reduced sales across the auto industry, but they lagged pre-pandemic profits even as luxury carmakers, such as Mercedes-Benz caught up with 2019 earnings this quarter.
Porsche has overtaken its former parent Volkswagen as Europe’s most valuable carmaker following its listing in September.
Volkswagen’s difficulties also included a €1.9bn non-cash impairment charge resulting from the writedown of its investment in Argo , a self-driving start-up it jointly owned with Ford.
Ford and Volkswagen joined forces in July 2019 to share control of the Pittsburgh-based company developing technology for driverless vehicles, which will shut operations.
VW’s initial investment was valued at $2.6bn, including $1bn in cash and the $1.6bn value of Volkswagen’s European self-driving unit, which was absorbed into Argo. VW also bought Argo shares from Ford for $500m.
Both companies shifted spending from the business on Wednesday, dragging Ford into a net loss with a non-cash pretax impairment of $2.7bn.
Reuters
No new fossil-fuel cars to be sold in EU from 2035
VW will produce electric cars only in Europe in a decade
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
GRACELIN BASKARAN: SA can win in the game of commodities diplomacy
European heavy industry flags rising energy and raw material costs
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.