VW to Report Record Profit, Still Cuts Bonuses image

Although VW is to post another record profit, the automaker will still reduce bonuses for management, as situation in Europe continues to be tense.

If PSA Peugeot Citroen and Ford reported the worst sales results in Europe last month, VW’s sales increased and the company gained market share in the region, despite the recession. As auto demand continues to decrease in western Europe, VW becomes more vulnerable in front of the crisis in its home market.

Last month VW’s sales in Europe dropped 12.3%, accounting for a third of the company’s profit, excluding Germany. The automaker added shifts at its Wolfsburg plant due to increased demand for its new Golf and the Tiguan compact SUV, but reduced production at the Emden plant, where it manufactures the Passat estate, Passat saloon and the CC coupe.

“Orders have weakened quite considerably,” said Ernst-Robert Nouvertne who runs two VW dealerships near the German city of Cologne. “We will have to fight hard for every single customer.”

After reporting a 14.9% increase in global deliveries in January, VW is expected to post another strong performance this month, helped by the US and China markets. Still the automaker keeps its decision to impose tougher bonus rules, to reduce CEO Martin Winterkorn’s payout, which might reach 20 million euro. VW decided that bonuses will only be offered to top executives if the company’s profit will reach at least 5 billion euro.

“Winterkorn and his peers are becoming victims of their own success,” said Hanover-based NordLB analyst Frank Schwope.