Fall in Volkswagen brand profit shows lasting effects of scandal

Thu Jul 28, 2016 7:01am EDT
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By Andreas Cremer

BERLIN (Reuters) - Volkswagen (VOWG_p.DE: Quote) reported a 12 percent drop in quarterly profit at its main passenger car division on Thursday, a big improvement on the quarter before but showing the challenges it still faces to overcome its emissions scandal.

Europe's largest automaker is struggling to rebuild its reputation and meet billions of dollars of costs after admitting in September to installing illegal software to mask toxic emissions on about 11 million diesel vehicles worldwide.

The German company published headline first-half numbers last week, saying underlying operating profit of 7.5 billion euros ($8.3 billion) beat analysts' expectations largely due to improvements at its mass-market VW brand.

The brand, Volkswagen's largest by revenues, saw profits plunge 86 percent in the first quarter.

However, some analysts said the drop in the division's second-quarter earnings showed there was still much work to do.

"Some of the details are mediocre, especially the VW brand result," said Commerzbank analyst Sascha Gommel of the company's full first-half earnings release.

"The numbers are slightly disappointing, the brand's earnings quality is still not good," he added, noting higher plant utilization at the brand in the second quarter had not translated into improved profits.

Commerzbank has a "hold" rating on Volkswagen shares, which were down 2 percent at 1020 GMT.   Continued...

A Volkswagen sign is seen on a wheel of a car presented during an auto show in Beijing April 25, 2016. REUTERS/Damir Sagolj/File Photo