VW blames DM2.3bn loss on Spanish subsidiary: Further cost-cutting looms with prospects for next year looking bleak

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The Independent Online
VOLKSWAGEN, Europe's leading car manufacturer, said yesterday it will suffer a DM2.3bn ( pounds 920m) group loss in 1993.

Ferdinand Piech, VW's chairman, blamed the dramatic fall from a DM147m group profit in 1992 mainly on heavy losses at the Spanish subsidiary, Seat, and difficulties in the US.

Volkswagen expects its parent company in Germany to post a small profit of around DM70m this year, down from DM132m in 1992. It is considering maintaining a DM2 dividend for 1993 on both ordinary and preference shares.

'Forgoing a dividend would not be good because there should be continuity for the shareholders,' Mr Piech said.

After a slight improvement in the third-quarter operations, VW said the fourth-quarter group performance has 'worsened noticeably'. It described the market situation in 1994 as providing few grounds for optimism, placing most of the burden for an improved earnings position on the company's cost-cutting programme.

Volkswagen expects to deliver 3.1 million vehicles worldwide in 1993, against 3.5 million last year. Total group sales are forecast to drop 10 per cent to DM77bn.

In Europe, where the company is still the number one car maker, VW's market share has shrunk to 16.5 per cent from 17.5 per cent, with deliveries down 22 per cent at 2 million units. In its home market, Volkswagen delivered 945,000, or 24 per cent fewer, vehicles.

The company expects stagnation in its core markets in 1994, with a slight decline in Germany and a small increase in Western Europe.

As part of its savings drive, the VW group has cut its workforce during 1993 by 23,000 to 250,000 worldwide. In Germany, the company employs 148,000 - a drop of 16,000 on last year. The group's 1993 investment volume will be 40 per cent down on the previous year's amount at DM5bn.

Mr Piech said he expected group and parent company earnings to improve in 1994. 'We are aiming to post a break-even result after taxes,' he said. Earlier this year, he repeatedly predicted a group profit for VW in 1993. While internal sources suggest that VW's domestic automobile operations have been running an operating loss, analysts believe that Mr Piech will have to resort to hidden reserves to make good his pledge that the parent company will return a small profit in 1993.

Mr Piech said Volkswagen's losses for 1993 in the US would exceed DM100m. In Frankfurt yesterday, VW shares closed up DM2.30 at DM425.80.

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