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Business

Volkswagen Sales Rise, But Profits Sink

Europe's largest carmaker, Volkswagen, shook up shareholders Wednesday by announcing that its third quarter profits fell by 51 percent.

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The Volkswagen Golf: A once reliable seller is no longer selling like hotcakes.

The company said it earned 439 million euros ($432.4 million) during the period between July and September. During the same period last year, the company earned 903 million euros. Analysts had expected earnings of 570 million euro.

Though overall sales in the third quarter were 2.2 percent higher than last year at 21.21 billion euros, higher costs for rolling out new models and weaker demand for the company's Golf and Passat models eroded earnings.

VW CEO Bernd Pischetsrieder on Wednesday said he expected sales this year of approximately 4 billion euro and the production of 5 million cars. The company also said it expected fourth-quarter sales to be similar to its soft third quarter.

The markets reacted negatively to the Volkswagen news, with shares falling 0.80 percent to 36.49 euros per share.

Golf moves past its prime

The company said it earned 439 million euro ($432.4 million) during the period between July and September. During the same period last year, the company earned 903 million euro. Analysts had expected earnings of 570 million euro.

Though overall sales in the third quarter were 2.2 percent higher than last year at 21.21 billion euro, higher costs for rolling out new models and weaker demand for the company's Golf and Passat models eroded earnings.

VW CEO Bernd Pischetsrieder said on Wednesday he expected sales this year of approximately 4 billion euro and the production of 5 million cars. The company also said it expected fourth-quarter sales to be similar to its soft third quarter.

The markets reacted negatively to the Volkswagen news, with shares falling 0.80 percent to 36.49 euros per share.

Golf moves past its prime

AutoStadt

Autostadt

Most of the new cars seen on Western Europe's roads this year started life on the conveyor belt at a Volkswagen plant like this one at Wolfsburg's Autostadt (photo). Yet Wolfsburg-based VW has had to see market shares being snapped up by its competitors. Even the former best-selling Golf is struggling with steadily dwindling sales.

The company has a number of new models in the pipeline, but they won't be ready until 2003. Both time lag and development costs are eating into Volkswagen's profit margins.

In the first three quarters of 2002, operating profits fell by 15 percent to just over 3.7 billion euros ($3.65 billion).

And expensive luxury cars like the new Bentley haven't been able to balance out the slump in Golf and Passat sales.

Competitors DaimlerChrysler and BMW recently announced healthy figures, despite a troubled market, but VW doesn't expect to see any marked improvement before the end of the year. The company is banking on 12 new models scheduled for release next year to help boost sales and profitability.

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