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Volkswagen Cuts Production Goal


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In the wake of the economic uncertainties in Europe, Volkswagen AG (VLKAY - Snapshot Report) recently announced that it will halt the production of Passat cars for a week in Germany, according to Reuters. The move is a part of the company’s initiative to reduce its group output by 300,000 vehicles this year.

According to sources, the company has reduced the global production target for the group to 9.4 million vehicles from the previous estimate of 9.7 million.  However, the target is well above the previous year’s output of 8.5 million vehicles. In addition, owing to the declining orders from the customers, the company also plans to close its production facility in Emden in northwestern Germany for a couple of days.

One of the company’s major competitors, General Motors Company (GM - Analyst Report), also remains challenged by the ongoing financial crisis in the euro zone. Its European operation Opel expects to incur an operating loss of €1 billion ($1.3 billion) in 2012 due to fewer-than-anticipated car sales.

Ford Motor Co. (F - Analyst Report), which also competes with Volkswagen, expects to lose between $500 million and $600 million in 2012 in the 19 European markets covered by the automaker, owing to the ongoing debt crisis in the region. Ford recorded a loss of $27 million in 2011.

Volkswagen, in the second quarter of 2012, registered a 20% increase in earnings per share to €12.05 ($15.2) from €10.04 per share in the corresponding quarter of 2011. Total revenues went up 19% year over year to €48.1 billion ($60.4 billion).

Headquartered in Wolfsburg, Germany, Volkswagen is the manufacturer and distributor of automobiles globally. The company operates in Europe, North America, South America, and the Asia-Pacific.

Currently, Volkswagen retains a Zacks #3 Rank, which translates into a short-term Hold rating.