By on April 27, 2011

Who will be the world’s most profitable carmaker this year? Canada’s CTV thinks that “this is going to be an interesting race. Will it be a big, multi-brand automaker from Germany, or a big, mostly one-brand automaker from the United States?” Both have a blue logo. One round, one egg-shaped. It’s Volkswagen against Ford.

Says CTV:

“Right now Ford is in the lead.

On Tuesday, Ford said it earned $2.6 billion in the first quarter (all figures in U.S. dollars). Today, VW said first-quarter profit more than tripled thanks to the success of the VW and Audi brands in China. Bloomberg reported that VW Group net income increased to 1.71 billion euros or $2.51 billion from 473 million euros a year earlier.”

So far, so good. However, says the CTV, “ultimately, the race to become the world’s most profitable car company could be won or lost” in China. This is a country where Ford, according to CTV,  “essentially has no presence in China at all.”

Not true. Ford has some presence in China, but it is nothing to write home about, and especially nothing to convert into huge profits.

Then, while talking about China at great length, the CTV overlooks the crucial item in Volkswagen’s books: The Chinese profits. The 1.71 billion euros or $2.51 billion Volkswagen made in the first quarter do not include “the €557 million share of the operating result accounted for by the Chinese joint ventures.” That’s another $816 million, whereas Ford stays mum about the size of the profits at its “unconsolidated China joint ventures.”

Ford’s first quarter gross revenue was $33.1 billion on sales of 1.4 million units. VW’s gross revenue was €37.5 billion ($ 55 billion) on sales of 1.99 million units. If the race for the most profitable carmaker would end here, it would be won by the guys from Wolfsburg.



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34 Comments on “Ford Leading Volkswagen In Profits? Who Are You Kidding?...”

  • avatar

    Canada?  Where’s that?

    Frankly, I’m just surprised that was able to piece together a semi-coherent article.

  • avatar

    Ford has no real presence in China? Interesting. Imagine what would happen if they got going in that market? I like both of these brands, so I’m happy that they are both doing well.

  • avatar

    You bothered to read an article on the CTV website? I wouldn’t use CTV as a barometer of how well informed Canadians are. The CTV morning news show usually consists of row upon row of whitened teeth, fake laughing, maple syrup, cuddly things and/or how great some local community is. You’d swear you were living in paradise the way they go on (although Vancouver isn’t bad).
    There are other news outlets out there in Canada.

  • avatar

    I wonder how many of those $15,999 Jettas are contributing to that 37+ billion?

    • 0 avatar

      Probably not many.  On their Web inventory, the local dealer has one of those.  The rest sticker about 24-25 large.

    • 0 avatar

      They are selling more than 10000 a month so quite a few I expect.
      I don`t care for the new Jetta but there is the Golf, GTi and Jetta Wagen which are all in the compact category and “European” so their is choice. Why the bitching?

  • avatar

    I’d say Ford’s logo is an oval, not egg-shaped.

    With VW’s revenue so much larger than Ford’s, I’d expect VW to have more profits.  As though it matters.

  • avatar

    Huh?  The last paragraph makes no sense. VW makes has a higher revenue $55billion vs. Ford’s $33billion in revenue.  Yet Ford made a profit of $2.6billion vs. VW profit of $2.5billion.  This tranlates to a profit margin of 4.5% for VW and 7.7% for Ford.

    Jeez, Ford is making a higher profit on signifantly less revenue.  I think you guys have it wrong.  Ford is squashing VW in the profitability category. 

    Also remember that half of the China profits go the JV partner.  So no mater how much VW and/or Ford make in China, half of the profits go to the JV.  

    • 0 avatar

      Did you read the part about the $816 million?

      • 0 avatar

        So total profit of 3.32B for VW, which is more in absolute terms, but still less (~6%) as a fraction of revenue. Could also look at profit per vehicle …

        Any restrictions on VW taking their Chinese profits out of the country? I’ve heard that the converse (Chinese companies bringing overseas profits back in) is restricted.

      • 0 avatar

        If you actually look at the profitability of the automotive business as a % of revenues, it gets to be very, very close as Ford earned a big chunk of its profits from its financing arm.  Not that financing profits are bad profits (assuming they are sustainable) …

  • avatar

    A couple of comments:
    1. Imagine how much greater Ford’s numbers would look compared to VW’s if the US Dollar weren’t in freefall;
    2. Smaller market-share in China could mean greater growth potentiala the market expands (it is a long way from being mature, and a lot of product moves could be made in the coming years to achieve this);
    3. If vehicle product segments have stopped their expansionary trend, and have stabilized, and or will slightly contract, then Mulally’s guess about dropping back to a core-brand plus (plus = Lincoln experiment) will have been correct;
    4. VW’s ca. 151 model structure must be a bitch to handle, being much less efficient organizationally, with higher overheads and duplicative efforts, and whatever degree of internal cross-brand canibalization being in any case massively greater than that of Ford.

    (It would be very interesting to look at the relative strengths of these two corporations in their 3 greatest markets, W. Europe, Americas, and China, by looking deeper into their respective markets and the balance between share and margin potentials, but I don’t have time now.)

    • 0 avatar

      The dollar in a free fall helps profit numbers from overseas operations. It can hurt US operations depending on how much of the cars are imported parts.

  • avatar

    Actually, the 1.71 billion Euro profit after tax VW reported should include the chinese Joint Ventures. However, comparing after tax profits to Ford to measure some sort of profitability is more or less useless, since Ford does not pay much taxes, due to past losses. Probably won’t for several years…
    If you compare just the operating profits, VW made more than 4 billion $, while Ford made 2.8 billion US$. That puts the two companies quite close on a “per revenue” basis, but these operating profits do not include the chinese Joint Ventures, yet do includee the profit of the financing arms (which is a few hundred million dollars higher for Ford).
    If you just compare the pre-tax operating profit of the automotive units (again, this is without the chinese JVs!), then VW has made 3.7 billion, while Ford has “only” made 2.131 billion US$. If you’d exclude the financial arms revenue from the overall revenue and then only use the automobile operating profits, VW is actually leading in profitability (7.8% to 6.8%). On a per unit sold base as well. (Using those numbers seems reasonably fair – they include no financial stuff and basically no China stuff – JV revenue gets ignored in these reports, JV profits don’t go into operating profit, but profits from “investment”…)
    The dollar is not really at a unnatural low atm. 1:1.4 is a Euro:Dollar exchange rate that basically has been “standard” since 2007. Also, a low dollar is actually helpful for Ford (since it makes their international profits “grow” when converted into dollars) and harmful for VW (since it decreases their US profits / increases their US losses when converted into Euro).
    I don’t see any sign that segment expansion has stopped or even slowed down. In fact, especially in the emerging markets, there is still huge room for additional segments…

    • 0 avatar

      I believe operating profit is before interest, so you are comparing VW before interest profits with Ford’s after interest profits. Remember Ford has reduce their debt tremendously over the past couple of years.

      A comparison of automotive operations would yield the following:

      Ford: $31billion in revenue with $2.1billion of pretax profit = 6.7% net margin

      VW: $44.7billlion in revenue with $2.5billion of pretax profit = 5.5% net margin

      Again, Ford is generating higher profits as a percent of revenue, I suspect because of their pickups in the US.

      I’m a little disappointed that TTAC isn’t doing a better job explaining this to it’s readers.

      • 0 avatar

        Since this is on page 2 now, no one is probably going to read this, but here goes anyway:

        I was comparing pre-tax operating profits of both Ford and VW as reported, assuming that they are similarly defined (should be some sort of EBIT as you state). I don’t really understand how i compared after to pre-tax numbers.

        Ford has themselves stated that they have made 2.1 billion US$ in pre-tax automotive operating profit (see [url=]here[/url]), while VW has made 2.6 billion Euro in pre-tax operating automotive profit (see [url=]here[/url], page 17), which is 3.85 billion $ on todays euro course and was about 3.7 billion $ when reported.

        I usually find comparing EBIT (or pre tax, operating profits) to be a more fair comparison. In this case, while it excludes chinese profits (which might be interesting if one wants to find out about a per-car profit, or a net margin in the car business), it also keeps messy stuff like more than a billion in losses on the Porsche share mess. Which, while interesting in itself, really aren’t useful in comparing the companies in the longer run..)

  • avatar

    I guess I’ll have the ask the obvious question: If VW’s cars are sooo bad, cheap, unreliable, (insert additional derogatory adjectives here), then how are they making so much money? They can’t be all bad! Of course, I’m not in the market for a car right now, so I watch this with some amusement, but I do pay attention.

    • 0 avatar

      The reality is that all of VW’s brands are very. Much of the chatter about reliability is just a lot of hyperbole and talk about “I have a friend (coworker, sister, mother, yoga instructor) who had a rotten VW…”

      In the US, the rankings for VW are low. But elsewhere, they are well above average. Americans love Camrys, Cosco, Jersey Housewives, Walmart, urban sprawl, Fast Food, strip malls and fat, so I’m not sure how qualified most people in the US are to judge quality anyway. 

      VW/Audi/Bentley/Lamborghini and all of the VW brands are leaders in their respective categories. That said, I’ll just choose to ignore the new Jetta completely.

      • 0 avatar

        The Passat I owned was no hyperbole. Neither was the one owned by a coworker.
        My ex had a Beetle with a stack of warranty repairs from its first 36k an inch thick that was terrifying to peruse.
        Must be hyperbole!
        The 1.8t?
        Pure hyperbole.
        (rolls eyes)
        I would mention their well known electrical problems, but of course, that’s hyperbole as well.
        In contrast, our Chrysler and Nissan products have been either perfect or needed only MAF’s over ten times the miles than the VW’s we had.
        That said, I’ll just choose to ignore all new VW’s completely.

      • 0 avatar

        It’s not hyperbole when it is backed up by independent data that shows very poor reliability for VAG products across the board.

      • 0 avatar

        VW sells cars to suit their market.  Why else are we getting cheap cars from factories scattered across the south?  China and Europe work because they’ve figured out what to sell to each market, with possibly SEAT (not so successful at the moment) and Skoda (a bit too successful at the moment) as exceptions.

      • 0 avatar

        340-4 — my Mk IV Golf was completely reliable and may MkII Seat Ibiza (TDi) also had no issues. Obviously just hyperbole.

      • 0 avatar

        There is nothing hyperbolic about a 9-year-old Passat that needs a quart of oil every 600 miles.

  • avatar

    So what!

  • avatar

    If the number of 01M 4-speed automatic transmissions that my Jetta TDI chewed up (5) are any indication, those profits are coming from parts sales….

    I loved driving that car, when it ran…! :-)

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