According to sources, German carmaker Volkswagen AG plans to combine the components business of its brands and divest certain assets as part of its strategy to navigate itself out of the emissions crisis.
The company’s senior management outlined its plans to the board, and may disclose it to investors by Thursday.
According to sources, the company plans to merge the components units of each brand into one new entity that would include about 70,000 employees at more than two dozen locations worldwide, allowing it to save costs and boost efficiency from a single management.
Currently, there were no plans outlined by VW to spin off or sell the new VW components unit.
VW is also likely to announce plans for a portfolio review, which could lead to the sale of non-core assets. While no decisions have been made on which assets are part of the sale, ones that could end on that list include motorcycle brand Ducati, the MAN Diesel & Turbo business and propulsion specialist MAN Renk.
An initial public offering of the trucking business could also be considered in future.
German car-manufacturer Volkswagen AG swung back to profit in the first quarter of 2016 after reporting a record loss during FY 2015 as the absence of new provisions against earnings led to optimism that the company has absorbed the bulk of the impact of the diesel emission crisis.
Key takeaways from Volkswagen’s 1Q 2016 results:
- Revenue during 1Q 2016 fell 3.4% y/y to €50.96bn.
- Profit for 1Q 2016 declined 20% to €2.31bn ($2.57bn) from €2.89bn a year ago, and below consensus estimates of €2.45bn.
- Operating profit excl. Chinese joint ventures, rose 3.4% to €3.4bn, led by a windfall of €309m, largely from foreign exchange adjustments to the €16.2bn that Volkswagen set aside in 2015 to cover the costs of the diesel crisis.
- Operating earnings excl. currency gains for the company in 1Q 2016 were roughly at the same level as last year.
- The company’s two Chinese joint ventures contributed €1.2bn in pretax earnings, down from €1.6bn a year ago. The earnings from China were booked as an equity gain by Volkswagen and appear in its net profit.
German car-maker Volkswagen AG reached a wage agreement with the labor unions in Germany which represented around 120,000 of its workers, in line with union agreements in the region.
The company would increase worker pay by a total of 4.8%, which would be staggered in two phases, coming close to the union’s demand for a pay rise of around 5%. The wage pact is valid for 20 months.
The agreement with unions comes on the back of last week’s worker’s strike at VW’s plants in Wolfsburg, Kassel, Braunschweig and Salzgitter after the car maker failed to make a wage offer.
As per the new agreement, workers would receive a 2.8% wage hike in September 2016, followed by another 2% rise in August 2017, and concessions on profit-sharing and pensions, including partial early retirement.
Separately, Volkswagen’s Chief Executive Matthias Mueller plans to announce a new strategy in mid-June 2016 for its core autos business that it hopes would boost its profitability by 2025 once it emerges from the emissions scandal.
Source: WSJ & Reuters
Norway’s $850bn sovereign oil fund Norges Bank Investment Management, was expected, in the coming weeks, to file a class-action lawsuit against Volkswagen in German courts.
Volkswagen had admitted last year that it had used sophisticated secret software in its cars to cheat exhaust emissions tests.
Norway’s wealth fund said that Volkswagen’s actions had contributed to a loss of NOK 4.9bn in the fund’s portfolio during the second quarter of 2015.
Previously, Volkswagen reached a nearly $10 billion deal with the U.S. government in April 2016, to buy back or fix about a half million of its diesel cars and set up environmental and consumer compensation funds.
Norway’s wealth fund had also recently demanded that U.S. oil companies, such as Exxon Mobil and Chevron, should do more to report on the risks of climate change.
The fund, itself built from Norway’s oil and gas wealth, had also made similar demands of oil firms worldwide.