Profit up for Volkswagen, Peugeot-Citroen, Fiat
MILAN, Italy—Three big European mass-market carmakers -- Germany's
Peugeot-Citroen managed a 49 percent increase in first-half net profit, which analysts credited to successful cost-cutting. While European car sales have been stalling, Volkswagen's second-quarter profit jumped 35 percent and Fiat's rose just under 2 percent for the first half, largely on increases in sales in developing countries -- VW in India, Russia and China, and Fiat in Brazil.
The results among the three mass-market automakers were better than expected, and all three were rewarded with a surge in share prices. Fiat shares rose nearly 14 percent to close at 11.88 euros ($18.70) on the Milan Stock Exchange, while VW gained 6.9 percent to 209.55 euros ($329.85) and Peugeot shares rose 9.2 percent to 34.90 euros ($54.94).
While their lineups of smaller, more fuel-efficient cars have helped against a tough market, some analysts still forecast clouds with no sign that the rising fuel prices dissuading consumers from new car purchases will settle down -- or that surging raw material costs won't continue to erode profit margins.
Volkswagen AG, Europe's largest automotive group, said second-quarter net profit rose to 1.6 billion euros ($2.52 billion) from 1.2 billion euros in the year-ago period. It recently reported vehicle deliveries in the first half of the year were up 5.8 percent to nearly 3.3 million worldwide, with especially strong sales in India, Russia and China.
"The operating environment has become tougher and is demanding considerable efforts from the automotive industry. This does not make it easy for us. However, we are well positioned and have the right strategy to master the tasks ahead of us," Chief Executive Martin Winterkorn said in a statement.
PSA Peugeot-Citroen reported net income in the six months until June rose to 733 million euros ($1.15 billion) from 492 million euros in the same period a year earlier. The carmaker said the efficiency measures in its turnaround program launched last year, known as CAP 2010, more than offset an increase in energy and raw material costs.
Fiat CEO Sergio Marchionne -- who has engineered the Turin-based automaker's turnaround marking the 14th straight quarter of profits following a dismal streak of 17 quarters of losses -- argued that worries about the industry "have been excessive."
"I think you need to give more credence to this industry," Marchionne told a doubting analyst during a conference call. "I think the European car industry is in much better shape than it has even been in, and I think a lot of it is a reflection of the quality of the leadership in place."
Marchionne reaffirmed the 2008 and 2009 targets for Italy's largest industrial concern, which besides manufacturing the Fiat, Lancia and Alfa Romeo brands also makes construction and agricultural equipment.
Marchionne did not rule out ordering more layoffs, or delaying rollouts of new vehicles to hit the market in an uptick. Fiat already has announced price increases and plans to lay off workers at four of its six Italian plants for three one-week periods this fall. Marchionne said Fiat also has been able to manage the rising price of commodities.
The Turin-based automaker said second-quarter net profit was 604 million euros ($950.8 million), up 1.8 percent from 593 million euros in the same quarter a year earlier. Strong auto sales in Brazil, up 27 percent, offset a slight contraction in Fiat's core Italian market.
Fiat -- which is riding a wave of popular new models from the iconic 500 to the thrifty Fiat Panda and flagship Grande Punto -- also outpaced the market in key European markets -- increasing volumes by 62 percent in France and 30 percent in Germany.
Sven Kreitmair, a credit analyst at UniCredit in Munich, Germany, said that while the European results showed that the small car niche occupied by VW, Fiat and Peugeot are selling better, it might not hold out.
"Fiat said for example that the economic downturn was not being felt in sales in Latin America or South America yet, but that doesn't rule out a slowdown in the second half of the year," Kreitmair said.
"The general opinion is that they're fully hedged on commodities and currency through the end of the year but in 2009, there may be more headwinds. If forex and raw materials stay where they are, things could get tougher in Latin America and South America, for example."
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AP Business Writers George Frey in Frankfurt and Emma Vandore in Paris contributed to this report.
