VW profit drops 86% on price cuts, Audi sales decline

Volkswagen AG, Europe's largest carmaker, said third-quarter profit plunged 86 percent as vehicle prices fell and the Audi luxury brand's deliveries declined in western Europe.

Net income fell to 172 million euros ($255.3 million), or 43 cents a share, from 1.21 billion euros, or 3.02 euros, a year earlier, Wolfsburg, Germany-based Volkswagen said today on its Web site. Sales declined 10 percent to 26 billion euros.

Volkswagen, which is taking over Porsche SE's automotive operations, reiterated a target of increasing global market share as government incentives and Chinese economic growth help keep sales of cars, sport-utility vehicles and vans about level with 2008 figures. The drop in third-quarter revenue contrasted with an 8.9 percent gain in deliveries.

"The size of the profit slump is dreadful, and shows that Volkswagen is overly focused on quantity, not quality," said Hans-Peter Wodniok, an analyst at Fairesearch in Frankfurt with a "sell" recommendation on the company's stock. The "pronounced disparity" between revenue and deliveries shows "unit sales seem to be the sole parameter."

Volkswagen rose 2.32 euros, or 2.1 percent, to 112.48 euros in Frankfurt trading. That pared the stock's drop this year to 55 percent, valuing the carmaker at 40.5 billion euros.

Analysts had predicted net income of 173 million euros, according to the average of seven estimates compiled by Bloomberg. Sales were estimated at 26.4 billion euros.

Sticking to Forecast

The carmaker will report another "clear" profit in the fourth quarter Chief Financial Officer Hans Dieter Poetsch said on a conference call, reiterating a forecast that full-year earnings and revenue won't reach the level of previous years.

"Although we assume that the Volkswagen group will be unable to escape the downward trend in most markets, we believe that it will perform better than the market as a whole and will be able to gain additional market share during the crisis," Volkswagen said.