Volkswagen scraps forecast after coronavirus forces production shutdowns
Volkswagen AG abandoned its full-year outlook after the coronavirus pandemic brought vehicle production and sales to a halt at factories in key markets including China and Germany.
“It is currently not possible to determine when a new outlook can be made for the full year," the world’s biggest carmaker said Thursday in a statement. “The impacts resulting from the pandemic on customer demand, the supply chain and production cannot currently be accurately forecasted."
Also check these Vehicles
The group initially targeted global vehicle deliveries on the prior-year level, revenue growth of as much as 4% and an operating profit margin between 6.5% and 7.5% excluding special items.
Also Read : Volkswagen India pledges to contribute in PM CARES fund to fight coronavirus
Key Insights
- First-quarter operating profit is forecast to slump to 900 million euros ($979 million). Turbulent financial markets and raw materials prices caused a 1.3 billion euro hit triggered by commodity derivatives and currency effects.
- Automotive net cash flow swung to a negative 2.5 million euros, as VW was forced to shut production -- first at plants in China, its biggest market, and then across Europe, where it employs about 470,000 workers.
- (Also read: Amid coronavirus shutdown, Volkswagen plans to resume production step by step)
- Chief Financial Officer Frank Witter warned on March 17 earnings might fall by at least 50% in the first three months. The company is gearing up to restart production in Europe, taking lessons from the earlier experience in China.
Market Reaction
- VW preferred shares were up 2.3% on Thursday. They have lost 33% since the beginning of the year, valuing the manufacturer at 63.6 billion euros.
- The Chinese auto market could rise as much as 14% in the second half of this year as pent-up demand and economic stimulus lure buyers back to showrooms, according to Bloomberg Intelligence estimates. This could trim the market’s full-year decline to about 6%.