Volkswagen AG Posts Record Profit In 2016

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Gabriel LoewenbergView gabriel loewenberg's Articles

In late 2015, when dieselgatel broke, it was looking like German car maker Volkswagen and it's affiliates would have a bleak year in 2016, and possibly beyond. As it turns out, that is not the case. Strong performances by several of it's divisions have offset any financial harm the emissions cheating scandal may have caused. Overall, 2016 profits are up 9.6% at Volkswagen Financial Services (VFS) as they took in nearly $2.27 billion.

Under the Volkswagen AG (VAG) umbrella, Audi, Porsche, Lamborghini, Ducati, and even SEAT had extremely strong to record breaking years. Audi alone had profit of $3.3 billion. Porsche's profits were up 14% to a record $4.2 billion, and they are giving bonuses to all employees. Leveraging gains from extremely profitable divisions such as Porsche, VAG purchased VW Finance, S.A. (South Africa) from SEAT. This netted Seat $975 million that will offset past losses and gave it a 2016 profit of $154.4 million.

This may seem like just a shuffling of cash from one area to another, but it's part of VAG's plan to restructure their financial divisions. They say this and a few other moves will provide "greater transparency and clarity for the supervisory authorities, enhances flexibility and leverages efficiencies in order to further strengthen and expand their successful business model." VAG seems to be wanting to expand and streamline the financial are of their business.

Going forward, Volkswagen will still have some challenges. Buy-backs from dieselgate are still underway. This will have an impact on it's 2017 profits. VAG is also investing heavily in electric vehicles, and this investment will require up-front capital. The largest auto maker in Europe seems to have weathered the storm and positioned itself for a strong future.