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'Der Spiegel' report hits VW shares

VOLKSWAGEN saw its share price fall sharply yesterday following a critical report in the influential news magazine Der Spiegel which suggested that the car maker would turn in a 1992 operating loss of DM700m ( pounds 280m).

Under the title 'Old mistakes and new breakdowns', the article catalogued the managerial mismanagement that, said the magazine, would lead the company to report a loss for the third consecutive year. A DM600m loss in 1990 widened to DM770m in 1991.

VW's share closed DM17.30 down at DM276 yesterday from Friday's close of DM293.30.

A spokesman for VW said yesterday: 'We have read the article concerned and have absolutely no comment to make about any of its assertions.' Der Spiegel reported: 'Of course, VW argues that the world car market is shrinking, but, as is demonstrated by spiralling costs, which the management has failed to keep in check, most of the company's problems are home-made.'

The brunt of the company's criticism is directed at the current chairman, 66-year-old Carl Hahn. Mr Hahn is blamed for ill-judgement, particularly in failing to build up US markets. He closed the VW Westmorland plant in 1988 and while the company sold 570,000 vehicles to the United States in 1970, this year the figure will be nearer 70,000. That is the same volume as the Toyota luxury Lexus model alone. Most of the VWs Americans buy are assembled in Mexico.

Mr Hahn is also roundly criticised for an expansion programme that 'has failed to measure up'.

The example is cited of the new plant in Bratislava, where work is in progress on a new Passat prototype. The magazine notes that, meanwhile, the main Passat assembly line in Emden is already on short time.

Senior VW managers are also alleged to be unhappy about a new plant whose daily capacity of 1,200 Golfs is to be doubled. Most are said to believe that the factory is not only unnecessary but risks undermining productivity levels at the huge Wolfsburg plant in the long term.

The new model Golf, which went into production in August of last year, is also plagued with problems, the magazine said. The Wolfsburg plant is not receiving the right parts in time, and half- finished vehicles often have to be taken off the production line.

'On the assembly line, as in management offices, the fatal results of mismanagement and failure are there for all to see,' the report concludes. Der Spiegel pins its hope for recovery on the Audi executive Ferdinand Piech, who is due to take over from Mr Hahn at the end of this year.