JLR Profits Up, VW Down. Say What?

As a car company, closing out 2009 with a profit is a commendable feat. Generally, you count yourself amongst the blessed if you are still alive (or bailed-out by friendly governments.) Let’s look at two companies that made money in 2009. At least, at some time in 2009.

The BBC reports that Jaguar Land Rover (JLR) has leapt back into profit, to the tune of £55m ($84m) in the last quarter of 2009. The good news are a bit clouded by the fact that JLR had registered a loss of £60m ($91m) in the previous quarter. JLR runs a fiscal year from end of June in the previous year to the beginning of July in the next. So, an annual profit is in the cards, but they still have another 6 months to go.

According to Tata Motors, a mixture of strengthening market conditions and a slew of new models helped lift JLR into profit. Most of JLR’s 68 percent growth came from outside the UK; places like Russia, Europe, North America and China. Tata Motors is currently mulling shutting either its Castle Bromwich plant in the West Midlands or its plant at Solihull. Though, if growth carries on like this, maybe those sites will get a reprieve. Other cost cutting measures include new employees’ wages being cut by 20 percent and the final salary pension scheme being closed to new members. Either way, Tata is bullish with plans to create 800 new jobs at its plant in Halewood, Merseyside where a new Range Rover will be built.

From Germany, the BBC (again) reports that Volkswagen AG’s 2009 (full year) profits have dropped 80 percent despite record sales in China, the world’s largest car market. Volkswagen announced profits of €960m ($1.31b) for 2009, down from €4.75b ($6b) in 2008. But hey, even a €1 profit during carmageddon would count as a miracle. There were many factors which could have contributed to this huge fall in profits, carmageddon being the main factor. Despite record sales in the world’s largest car market, sales for the Volkswagen group, as a whole, were down 7.6 percent. Also, Volkswagen went on a bit of a spending spree. They bought a stake in Suzuki for $2.5b. VW is also in the process of a lengthy takeover of the Stuttgart upstart, Porsche. Which normally would hit the books this year or later. But knowing VW CFO Hans Dieter Poetsch, he probably built in tax-saving reserves for these purchases. Remember: In a high tax environment like Germany, profits aren’t the name of the game, free cashflow is.

Be it as it may, Volkswagen is still determined to make the year 2018 (or sooner) the year they become the world’s largest carmaker. Be careful Wolfsburgians, you don’t want to fall into the Toyota trap, over expand and jeopardize your world famous quali… oh.