VW to make 1993 payout despite loss: Car maker's shares move up sharply in Frankfurt

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The Independent Online
VOLKSWAGEN, the German car maker, is expected to pay a DM2 dividend for 1993, despite losses of more than DM2.3bn ( pounds 800m). The disclosure by company sources, combined with a forecast of a small profit for 1994, drove VW's shares sharply higher in a Frankfurt market already boosted by the weekend settlement in the engineering industry.

VW shares rose to DM458 in early post-bourse trading, up DM16 on the day.

VW said a 1993 dividend payment was possible because the group would not book the substantial losses at its Spanish subsidiary, Seat, fully in 1993, but spread them over three years.

Still the most inefficient among western Europe's big manufacturers, Volkswagen is proceeding urgently with plans to simplify operations inside the group.

Unlike corporations such as General Motors, which already shares a substantial parts usage between its various marques, Volkswagen continues to suffer from wasteful multiplication, not just between its different subsidiaries, but within a single marque itself, such as Volkswagen.

Ferdinand Piech, VW's chief executive, citing over 30 axles and numerous different engines for the VW Golf model alone, set a reduction of such variety as a priority.

The biggest savings are expected to come from a reduction of the number of basic chassis platforms from 16. The group still uses separate platforms for similar-sized cars in its VW, Seat, Audi and Skoda units. The plan over the next seven to nine years, as new models are introduced, is to have just four basic platforms.

The smallest, based on the new VW Polo, will also serve for the small Seat and Skoda. The second, based on the Golf, will be shared by the new Audi city car, a second Skoda range, and the replacement Seat Toledo. The third will cover medium-sized cars such as the new Audi 80 and 100, and the VW Passat. A fourth will be for Audi's attempts to gain a hold on the luxury car market.

Analysts pointed out that the bulk of these savings are long-term, and will not help VW to achieve its turnaround in the next year or so. 'The problem with VW is it is always running way behind the others trying to catch up,' said Joachim Bernsdorff of Bank Julius Bar in Frankfurt. 'On sharing parts it is worlds behind its rivals.'

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