Volkswagen's 6 Month Profit Likely To Exceed Combined Detroit 3

Bertel Schmitt
by Bertel Schmitt

While natural and man-made disasters rattled the globe, Volkswagen, Europe’s largest and by the end of the year most likely the world’s second largest auto manufacturer, reports eye-popping numbers for the first half year of 2011.

Including China, Volkswagen made $13.5 billion in the first half of 2011. How did they pull off that economic miracle?

Volkswagen turned 4.1 million cars into an operating profit of €6.1 billion ($ 8.8 billion). Volkswagen makes an operating profit of 7.8 percent on each car, a surprising number for a high volume manufacturer. Wait, it gets better.

The operating profit does not include the Group’s €1.2 billion ($1.7 billion) share of the operating profit from the Chinese joint ventures, which is up 50 percent. These joint ventures are recognized using the equity method. The put/call options on Porsche Zwischenholding GmbH lifted the numbers further, leaving Volkswagen with a profit before tax for the first half of the year amounting to €8.2 billion ($11.8 billion), up 215.4 percent from 2010, Volkswagen said in an emailed statement.

After paying taxes, Volkswagen retained €6.5 billion (€9.3 billion), up 261.1 percent. Taking the Chinese results into account, the before tax profit would be €9.4 billion ($13.5 billion), if Volkswagen would be silly enough to pay German taxes on Chinese profits.

Volkswagen sits on a cash pile of €19.4 billion ($27.9), and this after making investments of €6.5 billion ($9.3 billion) and paying €3.3 billion for the trading business of Porsche Holding Salzburg, the increase in the investment in MAN SE, and the investment in SGL Carbon SE.

Volkswagen invested 3.7 percent of sales into property, plant and equipment, its financial plan allows that number to increase to around 6 percent of sales.

While large automakers with high exposure to the U.S. market had to a large degree cease investments into new models and technologies after carmageddon, Volkswagen never did. With the usual 3-5 year time lag, this is beginning to bear fruit and will keep the company in a strong position for the coming years. The modular toolkit system is expected to allow larger brand differentiation at lower cost.

Global market share rose from 11.7 percent in the first half of 2010 to 12.4 percent.

For the rest of the year, Volkswagen expects lower demand in many Western European countries. In Central and Eastern Europe, Volkswagen is forecasting a rise in vehicle sales. It banks on a continuation of the positive trends in the Chinese and Indian markets, and thinks new vehicle registrations in North and South America to rise.

For the end of the year, Volkswagen expects “significantly higher” sales revenue and operating profit. The DetN expects the Detroit 3 to report Q2 profits of around $4 billion before the nasty one-time charges. It could very well be that when all the numbers are in, Volkswagen made more money in the first half of 2011 than all of Detroit.

Volkswagen’s complete interim report is available here.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Eldard Eldard on Jul 28, 2011

    Once Hyundai and Toyota start their massive push towards the BRIC countries (and who's the delusional moron who included South Africa in this elite group?), even Darth Vader's EMP powers won't be able to save VW. :)

    • See 1 previous
    • Eldard Eldard on Jul 29, 2011

      @mike978 They concentrated mainly on the US. And 3rd world countries differ from "1st world" Europe where the best selling cars are the likes of Fiesta and Golf.

  • Robert.Walter Robert.Walter on Jul 28, 2011

    If I understand my scan of the article, it would seem that a significant part of this profit is due to financial engineering ... If so, I would guess that that portion is not really sustainable, or repeatable even...

  • Slavuta Inflation creation act... 2 thoughts1, Are you saying Biden admin goes on the Trump's MAGA program?2, Protectionism rephrased: "Act incentivizes automakers to source materials from free-trade-compliant countries and build EVs in North America"Question: can non-free-trade country be a member of WTO?
  • EBFlex China can F right off.
  • MrIcky And tbh, this is why I don't mind a little subsidization of our battery industry. If the American or at least free trade companies don't get some sort of good start, they'll never be able to float long enough to become competitive.
  • SCE to AUX Does the WTO have any teeth? Seems like countries just flail it at each other like a soft rubber stick for internal political purposes.
  • Peter You know we’ve entered the age of self driving vehicles When KIAs go from being stolen to rolling away by themselves.
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