July 17, 2015 / 6:00 PM / 2 years ago

VW brand sales drop 8.6 percent in June as demand weakens in China, Latam

The Volkswagen logo is seen on a Volkswagen XL Sport car during the media day at the Paris Mondial de l'Automobile, October 3, 2014.Jacky Naegelen

BERLIN (Reuters) - Sales at Volkswagen's (VOWG_p.DE) core division fell for an eighth time in nine months in June, as slowing momentum in China and slumping demand in Latin America outweighed gains in Europe.

Deliveries at VW's namesake brand, which accounts for 60 percent of group sales, dropped 8.6 percent year-on-year to 470,700 vehicles, taking the six-month decline to 3.9 percent, Wolfsburg-based VW said on Friday.

Except for February, when brand sales held steady at 413,700 cars, deliveries at VW's biggest auto division by sales and revenue have slid in every month since last October.

Over the first half of the year, a rise of 3.1 percent in Europe and 3.2 percent in North America failed to offset a 6.7 fall in the key Chinese market, where VW last year sold more than a third of its group-wide record 10.1 million vehicles.

"The Chinese market is changing," sales chief Christian Klingler said in a statement published by VW after German stock markets had closed for the week. "As the market leader we cannot escape the development of the market."

The VW brand's languishing profit margins and unresolved cost issues were among the reasons why former Chairman Ferdinand Piech attacked Chief Executive Martin Winterkorn this spring, sources have said.

The CEO last year announced plans to trim costs at the core division by 5 billion euros ($5.4 billion) annually from 2017.

This month, VW installed former BMW (BMWG.DE) executive Herbert Diess as VW brand chief to see through the cuts.

Some of the problems at the VW brand hark back to the group's centralized leadership culture, with Winterkorn and Piech seeking control over almost any project.

Europe's largest automaker is seeking to draw up a new company structure by September to help raise profitability and tackle underperformance in foreign markets such as the United States and Brazil.

Group deliveries at the 12-brand group, also including luxury division Audi and sports-car maker Porsche, dropped 4.3 percent year-on-year to 840,400 cars in June, pushing year-to-date sales down 0.5 percent, VW said in a separate statement on Friday.

Reporting by Victoria Bryan and Andreas Cremer; Editing by Michael Nienaber and David Holmes

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