Volkswagen prepares for tough year ahead

VOLKSWAGEN Group is bracing for tough conditions in the 2020 financial year as the coronavirus begins to tighten its grip on the automotive industry and world at large, however chairman of the board of management Herbert Diess remains confident the company will pull through the crisis.

 

Speaking at Volkswagen’s annual media conference this week, Mr Diess acknowledged the road ahead for Volkswagen would be a difficult one with the uncertainty of the COVID-19 virus.

 

“2020 is a very difficult year,” he said. “The corona pandemic presents us with unknown operational and financial challenges.

 

“At the same time, there are concerns about sustained economic impacts. We will succeed in overcoming the corona crisis by pooling our strengths and with close co-operation and high morale in our group.”

 

The effects of the virus have already begun to impact Volkswagen, with a number of factories closing down for at least a two-week period.

 

Volkswagen will shut its German production facilities in Wolfsburg, Emden, Dresden, Osnabrueck and Zwickau, while affected factories outside the domestic market include Pamplona in Spain, Palmela in Portugal and the Slovakian plant in Bratislava.

 

Six components facilities across Europe will also be closed during the two-week quarantine.

 

Along with its factories, all Volkswagen canteens, self-service shops, cafeterias, bistros, restaurants and catering services will be closed, all major events cancelled and all meetings to be held via video link.

 

All employees returning to Germany from abroad after March 14 are forbidden from entering any VW plant or facility for at least two weeks.

 

Volkswagen is anticipating the coronavirus to create a “rapid decline” in demand for vehicles, while the supply chain is also expected to be affected.

 

This applies to other brands under VW ownership such as Audi, Porsche, Skoda, Seat and Lamborghini.

 

The bad news comes on the back of a strong fiscal 2019 for Volkswagen, as it began to shake off the financial hangover of its diesel-emissions cheating scandal and subsequent fines.

 

Sales revenue for the company increased by €16.8 billion ($A30.7b) to €252.6b ($A461b), while operating profit before ‘special items’ increased over €2b to €19.3b ($A35.2b).

 

Those ‘special items’ are dieselgate fines, which fell from €3.2b ($A5.8b) in 2018 to €2.3b ($A4.2b) last year.

 

Deliveries to customers rose 1.3 per cent to 10.97 million units, while profit before tax increased 17.3 per cent to €18.4b ($A33.6b).

 

Revenues increased over the year for Skoda, Seat, Bentley, Porsche and Volkswagen Financial Services, while VW Commercial Vehicles remained steady.

 

The coronavirus will no doubt have a serious impact on productivity, with VW board of management member for finance and IT Frank Witter saying it was almost impossible to provide a prediction for 2020.

 

“The spread of coronavirus is currently impacting the global economy,” he said.

 

“It is uncertain how severely or for how long this will also affect the Volkswagen Group. Currently, it is almost impossible to make a reliable forecast.

 

“We are making full use of all measures in taskforce mode to support our employees and their families and to stabilise our business.”

 

Volkswagen Australia recorded 49,928 sales in 2019, down 11.8 per cent over the 56,620 it managed in 2018.