VeeDub Is Raking It In

Bertel Schmitt
by Bertel Schmitt

Volkswagen is rolling in money. In the first nine months, VW registered an after tax profit of more than €4b ($5.57b). No funky EBITA, no “gains before restructuring charges,” straight bankable after tax profit. That’s six times the €655m the company reported in the same period of the prior year. (While most other car makers reported hefty losses.)

Ever the cautious executives, Volkswagen warned that one should not get used to it, and that the last quarter may not be as rosy as the first three. We shall see. They were always good at sandbagging. The only thing Volkswagen’s Finance Dept. promised was that the operative earnings will be above last year when the year is over, says Automobilwoche [sub].

Duh. That’s easy. In the first nine months of 2009, the operative earnings were €1.5b, this year, the number already stands at €4.8b.

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.

More by Bertel Schmitt

Comments
Join the conversation
7 of 14 comments
  • Asdf Asdf on Oct 22, 2010

    Let's hope and pray that VW won't use the money to buy Alfa Romeo...

  • Jjster6 Jjster6 on Oct 22, 2010

    The financial geniuses at TTAC are killing me. Criticize GM's financials and the pour the love over VW. Do any of you realize that VW's financial statments are measured in IFRS while the US manufacturers are measured in US GAAP. These two different accounting standards can produce materially different results. Before you conclude that VW is "raking it in" you might want to actully understand the yard-stick (meter-stick?) they are being measured with. I haven't done the analysis yet, but it is way to early to conclud that VW is raking it in. And I have worked for a German compnay before. Under previous German accounting rules companies could make a "profit accrual." Basically it meant they can save current profits for future years. Under IFRS they can no longer do this, but old habits die really hard!!!

    • Bertel Schmitt Bertel Schmitt on Oct 23, 2010

      If you have worked for a German company, then you know that a German company only reports profits if it absolutely has to, and when other measures of hiding profits (accruals, Rückstellungen, for possible later payments are one) or delaying taxes are completely exhausted. (Maybe the sneaky Germans didn't let you in on their secrets.)

      Reporting a loss once in a while is the norm, because it helps you recoup previously paid taxes. The German stock market knows this and it reacts blase. When VW reported the monstrous after tax gain, the stock dropped. The market views paying taxes as wasteful.

  • JJ JJ on Oct 22, 2010

    1) Design a range of generally acceptable cars 2) Avoid shelling out major dough for complete redesigns as long as possible. Instead... 3) Keep updating existing cars with newly designed light units 4) ???? 5) Profit

    • See 1 previous
    • Tosh Tosh on Oct 22, 2010

      4) cutesy ads that remind Americans that VWs use authentic German engineering

  • Porschespeed Porschespeed on Oct 24, 2010

    Bertel, No "D" in German GAAP? In the USA 'tis either EBITDA or EBITDAA that is scrutinized. My personal metric is that all that matters is what you get to keep, but accountancy is one of the dark and evil arts...

Next