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VW caps manager salaries after return to profit

Germany's embattled carmaker Volkswagen roared back into the black last year, shaking off its 2015 emissions cheating scandal - and introducing a new corporate culture with a cap on managers' salaries.

The world's largest automaker by sales on Friday reported a net profit of 5.1 billion euros ($5.4 billion) for 2016 on record revenues of 217.3 billion euros - a year-on-year sales increase of about two percent.

The 2016 results was welcome news, especially compared to the previous year. In 2015, the Wolfsburg, Germany-based company had made its first loss in two decades, after it was hit by an emissions-cheating scandal. In mid-2015, it admitted that about 11 million of its diesel cars worldwide were equipped with a so-called cheat device, manipulating pollution tests to mischaracterise particulate emissions.

"While the past fiscal year posed major challenges for us, despite the crisis the group's operating business gave its best-ever performance," chief executive officer (CEO) Matthias Müller (pictured at top) said in a statement.

Despite the damage to its reputation by the 'Dieselgate' scandal, the group delivered 10.3 million vehicles in 2016, driven by strong demand in Europe and the Asia-Pacific region. The record result meant VW overtook rival Toyota to become the world's top-selling carmaker.

In 2015, VW group's dividend payout to shareholders was very modest, at 0.11 euros per share for preferred shareholders and 0.17 euros per share for ordinary shareholdres.

2016's dividend payout will be much more generous. The group plans to pay two euros per share to preferred shareholders, and 2.06 euros per share to ordinary shareholders.

Leaving dieselgate behind

Looking ahead, VW said it expected the upward trend to continue in 2017, penciling in a "moderate increase" in car sales and a four-percent rise in revenues.

"As the figures show, Volkswagen is very solidly positioned in both operational and financial terms. This makes us optimistic about the future," Müller said.     

VW's emissions scandal triggered mass recalls and a sea of lawsuits, forcing it to set aside billions of euros to cover the costs of the crisis.

On Friday, the group said it added another 4.4 billion euros to its Dieselgate compensation reserve in the last quarter of 2016, bringing the total amount of provisions for re-fits, buy-backs, fines and compensation to 22.6 billion euros.

The group has so far committed to paying out more than $22 billion in fines and compensation to drivers, dealers, and regulatory authorities in the United States, where some 600,000 cars were equipped with the defeat devices. But it has not offered any compensation to the millions of European drivers whose cars were similarly affected.

Watch video 25:59

Volkswagen: a corporate health check

Salaries cap

Also on Friday, Volkswagen announced it was putting a cap on top managers' potential earnings, as it looked to quell widespread anger over bonuses paid even as the carmaker suffered a record loss in 2015.

Under new rules approved by the supervisory board, total pay for its chief executive will be capped at 10 million euros, and that of other top managers at 5.5 million euros.

The company did not give details on how remuneration under its revamped policy will compare with last year's pay, beyond saying that "theoretical maximum compensation will decline by as much as 40 percent".

Eligibility for bonuses will be tightened under the new forward-looking system, which will allow for an increase of up to 30 percent in fixed salaries.

Managers will lose their annual bonuses if the automotive group's operating profit stays below 9 billion euros, compared with a current threshold of 5 billion euros, or if the return on sales remains under 4 percent.

Long-term bonuses, meanwhile, are meant to track share price performance, the company said, citing recommendations from Germany's corporate governance code.

uhe/nz (Reuters, AFP, dpa)

 

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