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."

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.

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.
• 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%.