Factory Shutdowns, Demand Slump Hammer European Auto Earnings
By William Boston
BERLIN -- Two of Germany's largest auto makers reported sharp
falls in earnings, revenue and new-car sales for the first three
months of the year. Volkswagen AG and Daimler AG's results are a
measure of the impact on manufacturers of the auto industry
shutdown that was part of the drive to contain the coronavirus
German auto makers suspended swaths of production in Europe, the
U.S. and China for weeks after Covid-19, the disease caused by the
new coronavirus, spread world-wide. Both Volkswagen and Daimler,
two of Europe's largest manufacturers, saw pretax earnings slide
more than 80% in the quarter as a result.
European auto makers and their suppliers have furloughed more
than a million auto workers across the continent. Even as factories
begin to reopen, most are operating at a fraction of their previous
output levels, making it difficult to forecast for the rest of the
"We have taken numerous measures to lower costs and secure
liquidity," Frank Witter, Volkswagen's chief finance officer, said
in a statement.
Net profit at Daimler, which makes Mercedes-Benz cars fell to
EUR94 million in the first quarter from EUR2.1 billion the year
Volkswagen, the world's largest auto maker by sales, reported
EUR405 million in net earnings after a 25% drop in production to
just under two million vehicles in the first three months of
As the virus spread in Europe and the U.S. in February and
March, it was beginning to recede in China, the world's biggest car
market by sales. Auto makers, including Daimler and Volkswagen,
have reopened their plants in China and are gradually reviving
output, but demand for new cars and production remain well below
levels at the same time last year.
Volkswagen said in its first-quarter report that "positive
impulses came from the developing economic recovery in China."
Still, the damage to the auto industry from slumping demand and
efforts to contain the virus by locking down large parts of the
global economy is widespread and could be long-lasting.
Ford Motor Co. this week reported a $2 billion pretax loss in
the first quarter, which it attributed to the impact of the
pandemic on its global business. Nissan Motor Co., Japan's
second-largest auto maker after Toyota Motor Corp., said Tuesday
that it expected to report a net loss, its first in more than a
decade, of up to $885 million in its fiscal year that ended on
As global auto sales slump, auto makers are cutting expenses and
securing loans to ensure that they have sufficient cash to weather
the coming months should demand fail to return to precrisis levels
and the economic slump worsen.
Daimler, which has been bleeding cash as a result of big
investments in new technology, said the outflow of capital worsened
in the first quarter, as negative cash flow in its industrial
businesses widened to EUR2.3 billion in the first quarter.
Volkswagen reported negative cash flow of EUR2.5 billion in the
first quarter, but said net liquidity had risen 11% in the same
period to EUR17.8 billion.
U.S. auto maker Ford said it has about $35 billion in cash,
which it described as sufficient to weather the storm for
Write to William Boston at firstname.lastname@example.org
(END) Dow Jones Newswires
April 29, 2020 04:19 ET (08:19 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Historical Stock Chart
From Aug 2020 to Sep 2020
Historical Stock Chart
From Sep 2019 to Sep 2020