By on February 28, 2010

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.

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10 Comments on “JLR Profits Up, VW Down. Say what?...”

  • avatar

    “sales for the Volkswagen group, as a whole, were down 7.6 percent”

    Hahaha lol. Had to kind of laugh. Just when you think the GTI is getting really popular you are reminded that it still is (despite massive ad campaigns) a niche freak car, especially in the USA. Most people will (still) get their full size family sedan or SUV or Subaru Outback thing. Or yes, haha, a truck. :D

    My personal opinion is that VW group should enjoy its niche market and not worry about eventually being some mainstream Toyota replacement or whatever. The lesson of history is that when you are the most mainstream… the niche goes away. VW thrives on niche. Of course, I suppose you can slant things like… huge sales in the rest of the world and you are still a niche freak in the USA … LOL

    • 0 avatar

      VW only is a niche player in the US. In Europe, they are the largest company with vehicles in virtually any segment, and being the leader in most of the segments.

      I really don’t know if their reliability in Europe is better. But cars over there typically end their useful life after 10-12 years and are driven less on average. So being less reliable seem to matter less to people. the annual registration tax for old (=polluting) cars is so high, mileage typically worse (at $8/gallon) that after 10 years you kind of want to get rid of the car anyway, reliable or not. In addition, repairs don’t seem to be so expensive in Europe. Since they sell the most cars, parts are not so expensive, and the VW dealers are much more competent than in the US (they couldn’t be any less competent)

  • avatar

    VW’s unreliabilty is wildly overstated. Finding a competent dealer less so unfortunately and that is key to their NA fortunes. There’s not much difference between the European VW’s and the NA models. It’s just that there a much better chance of finding someone who can fix it, right and cost effectively, over there.

    If you had a Chevy in Europe, the same thing would apply. One reason why their marketshare is so low over there.

  • avatar

    I must admit some confusion over your comment about the high corporate tax rates in Germany. OEDC tax tables list theirs at around 30%, but the US is (along with Japan) substantially higher at 39%. Is there something I am missing? Perhaps some items of deduct ability that give them an effectively higher rate? I don’t question the matter of free cash flow, after all the reason why GM was always bankruptcy bound was because their auto operations had not created any of that for years.

  • avatar

    VW dealer service has stunk ever since the late 70s. Case in point: The family bought a 1980 Rabbit. Fun to drive? Yes. Good gas mileage? Yes. Reliable? Mostly so, it never stranded anyone. Between the persistent electrical gremlins (I had to kick the fusebox to make the left headlight work. Dealer could not replicate the problem. The radio stopped working? Pounding on the dash would fix it. Dealer couldn’t locate that problem either), the exhaust manifold that kept breaking, and the persistent coolant consumption, which the dealer couldn’t fix either, it got quickly moved to beater status, where it remained until sold 10 years later. A work buddy of my father bought it & overhauled the motor. He found the coolant leak, he told my father that a bolt was missing from the head and letting antifreeze enter the combustion chamber. The dealership probably didn’t even take off the valve cover whule looking for that leak. Clueless. Because of the lousy dealer service, VW lost several loyal customers in my immediate family. My father was in the service and had grown to love VW’s since he bought his first in 1962. We never bought anything else. At one point in 1981, we had a Karmann Ghia, the Rabbit and a Westfalia Bus. I’d like a new Rabbit, they look good and they’re fun to drive – but I haven’t heard anything about the dealer experience getting better, only worse. That’s what kept me away when I bought my Hyundai three months ago.

    • 0 avatar

      my father in law used to have a 2005 Jetta. that car had been on the lot for 6 months before he bought it and the battery was dead. After recharging and using it for some months I got stranded with a dead battery. After hearing the 6-month story and dead battery I knew right away that the discharged acid had damaged the lead and the battery needs to be replaced. Since it was under warranty, the tow truck had to bring it to the VW dealer, who took 3 days to figure that out. Oh, my. such a simple problem I (and anyone with a brain) could have figured out. If it takes pros 3 days (and if it is not warranty anymore you pay them!) then they are not pros. It takes 3 days to repair a major collision damage, a dead battery should take less.

    • 0 avatar

      I would think the battery problem could have been easily found by testing the specific gravity of the acid. If the Pb had been damaged, there should have been a corresponding change to the acid.

      Any chemists or techs out there?

  • avatar

    “Tata Motors is currently mulling shutting either its Castle Bromwich plant in the West Midlands or its plant at Solihull”

    Small point of pedantry…Both Castle Brom and the (Land)Rover Solihull plant are in the West Midlands. In fact both plants are located in the borough of Solihull to further complicate matters about 5 miles apart.

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