Volkswagen beats forecasts in 2018 despite dieselgate scandal

Volkswagen’s sales of 10.8 million vehicles around the world from its 12 brands brought in €235.8 billion. (Reuters)
Updated 12 March 2019
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Volkswagen beats forecasts in 2018 despite dieselgate scandal

  • Selling 10.8 million vehicles around the world from its 12 brands brought in €235.8 billion
  • ‘We performed very well in spite of strong headwinds,’ chief executive Herbert Diess said in a statement

WOLFSBURG, Germany: Mammoth German carmaker Volkswagen reported Thursday growing profits and revenues in 2018, beating analysts’ forecasts despite enormous charges linked to its “dieselgate” emissions cheating scandal and headwinds from tough new pollution tests.
The Wolfsburg-based group said it boosted its bottomline 6.0 percent year-on-year to $13.7 billion (€12.15 billion), higher than expectations from analysts surveyed by Factset.
Selling 10.8 million vehicles around the world from its 12 brands brought in €235.8 billion, with revenues posting slower growth than profits at 2.7 percent.
And operating, or underlying profit added just 1.0 percent, to €13.9 billion.
“We performed very well in spite of strong headwinds,” chief executive Herbert Diess said in a statement.
One major burden was the WLTP emissions tests, introduced since VW’s 2015 admission that it manipulated millions of cars worldwide to appear less polluting.
The new process’ introduction in September cost VW almost one billion euros by slowing production, a spokesman said, with the effect visible in a fourth-quarter operating result 4.2 percent lower year-on-year, at €3 billion.
Meanwhile the group notched up €3.2 billion in special items to cover costs relating to “dieselgate,” the same as the previous year.
A sizeable chunk of the costs came in Germany as VW paid a group-wide fine of €1 billion, while high-end subsidiary Audi had to forfeit 800 million euros.
Since 2015, legal costs, fines, buybacks, and refits to affected cars have cost VW €29 billion, the group said.
Looking ahead, VW said it had expanded its plans for a vast array of electric models over the coming decade to 70 rather than 50, aiming to sell 22 million battery-powered cars by 2028.
It hopes the offensive will help it meet strict new carbon dioxide emissions requirements in the European Union.
“The share of electric vehicles in the group fleet is to rise to at least 40 percent by 2030” with Korea’s LG, Samsung and SK Innovation and China’s CATL providing the vital battery cells to power the drive.
“Volkswagen is also taking a close look at possible participation in battery cell manufacturing facilities in Europe,” it added.
On a closer time horizon, VW aims for “slightly” higher unit sales this year than in 2018, with revenues “as much as 5.0 percent” higher and an operating profit margin of between 6.5 and 7.5 percent — up from 5.9 percent last year.


US economists less optimistic, see slower growth: survey

Updated 25 March 2019
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US economists less optimistic, see slower growth: survey

  • While the odds of a US recession by 2020 remain low, they are rising
  • The odds of a recession starting in 2019 is at around 20 percent, and for 2020 at 35 percent

WASHINGTON: US economists are less optimistic about the outlook and sharply lowered their growth forecasts for this year, amid slowing global growth and continued trade frictions, according to a survey published Monday.
And while the odds of a recession by 2020 remain low, they are rising, the National Association for Business Economics said in their quarterly report.
The panel of 55 economists now believe “the US economy has reached an inflection point,” said NABE President Kevin Swift.
The consensus forecast for real GDP growth was cut by three tenths from the December survey, to 2.4 percent after 2.9 percent expansion in 2018.
The economy is expected to slow further in 2020, with growth of just 2 percent, the report said.
Three-quarters of respondents cut their GDP forecasts and believe the risks of to the economy are weighted to the downside.
“A majority of panelists sees external headwinds from trade policy and slower global growth as the primary downside risks to growth,” NABE survey chair Gregory Daco said in a statement.
“Nonetheless, recession risks are still perceived to be low in the near term.”
Panelists put the odds of a recession starting in 2019 at around 20 percent, and for 2020 at 35 percent, slightly higher than in December.
Daco said that “reflects the Federal Reserve’s dovish policy U-turn in January” when the central bank said it would keep interest rates where they are for the foreseeable future, a message reinforced this week.
After four rate increases last year, Daco said a “near-majority of panelists anticipates only one more interest rate hike in this cycle compared to the three hikes forecasted in the December survey.”
Panelists see wage growth as the biggest upside risk to the economy, despite expected increase of just 3 percent this year, as inflation holds right around the Fed’s 2 percent target.
Meanwhile, amid President Donald Trump’s aggressive tariff policies, the panel projects the trade deficit will rise to a record $978 billion this year, beating last year’s record $914 billion.
In an interesting twist in the survey, only 20 percent said they expected to see the dreaded “inverted yield curve” — when the interest rate on the 10-year Treasury note falls below the 3-month bill — this year.
In fact, the yield curve inverted on Friday for the first time since 2007.