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Volkswagen profit tumbles on dieselgate costs

The troubled German auto maker has reported a steep drop in net profit for the first quarter of 2016, but described its result as "solid" in view of "challenges" arising from its diesel emission-cheating scandal.

Embattled German car giant Volkswagen (VW) delivered more than 2.5 million vehicles to customers between January and March this year - about 12,000 more than in the same quarter a year ago. However, revenue from those sales was been down 3.4 percent at 51 billion euros ($56.7 billion), VW said in its earnings report published Tuesday.

The 12-brand group's net profit even fell deeper, slumping 20 percent to 2.31 billion euros. In a statement, VW said it had delivered a "solid performance in a challenging market."

VW chief executive Matthias Müller added that he was satisfied with the company's start into 2016 - a year which he described as undoubtedly demanding. "We have succeeded in limiting the economic fallout from the diesel scandal and chalk up respectable results in very difficult conditions."

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VW opens up about impact of scandal

Europe's biggest carmaker is currently facing massive financial consequences from an emissions-cheating scandal which affects about 11 million of its diesel vehicles. In the first quarter of 2016, it has begun recalling those cars to refit software designed to cheat emissions tests.

Earlier this month, VW reported progress on reaching a settlement with US authorities, reportedly including compensation for customers in the country. According to its earnings report, the carmaker sits on cash reserves of almost 26 billion euros, which according to VW's Finance and Controlling chief Frank Witter should be enough to weather the crisis.

"The higher net liquidity gives us the financial stability and flexibility we need to be able to manage the challenges still to come and to grow profitably," he said in the report.

Looking ahead, VW confirmed its full-year forecast, saying it expected sales to decline by "up to five percent," but with an increase of between 5.5 and 6.5 percent for the operating return on sales.

Investors were disappointed with the result, selling VW shares in morning trade at the Frankfurt Stock Exchange, and causing the stock to fall 4.7 percent to about 130 euros.

uhe/kd (Reuters, dpa, AFP)

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