Profits Promised

Labeling as “unsatisfactory” last year's 58.2% pre-tax profit increase to €1.7 billion ($2 billion), Volkswagen AG Chairman Bernd Pischetsrieder promises more improvement in 2006, but declines to reveal a specific target.

The Volkswagen Group expects sales and revenue to “increase slightly” this year because of its ongoing product offensive, VW says.

Primary contributors will be material cost reductions and production process improvements — key elements of Volkswagen's ForMotion-plus initiative.

The Volkswagen Group achieved the full-year 2005 profit boost due to a 16-product rollout that sparked a 3.2% jump in vehicle sales — to a record 5.24 million units — and a 7.1% hike in sales revenue to €95.3 billion ($113 billion).

“Overall, however, the level of earnings that we achieved remains unsatisfactory,” Pischetsrieder says.

The answer is to “systematically restructure the core Volkswagen brand,” he adds. After taxes, the auto maker earned €1.1 billion ($1.3 billion), up 61% compared with 2004's €697 million ($830 million). VW already has begun talks with the IG Metall trade union that represents many of Volkswagen's hourly workers.

Meanwhile, Pischetsrieder is sticking to his 2008 goal of reaching a pre-tax annual profit of €5.1 billion ($6 billion).

“We are confident that we can achieve them (future goals) with the support of our new products, the restructuring program and ForMotion,” he says.

Pischetsrieder promises 28 new models and derivatives this year, in Europe alone.

Europe, Turkey and the Middle East accounted for €5.1 billion ($6 billion) of VW's sale revenue hike, the auto maker reveals. Annual volumes there rose 7.9% over 2004.

Meanwhile, in North America, product planning chief Charlie Waterhouse and Greg Smith, executive director of distribution and logistics, have been relieved of their jobs under the new tenure of Volkswagen of America Inc. President Adrian Hallmark, who succeeded Len Hunt late last year.