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VW says virus outbreak poses ‘unknown’ financial challenges

‘The corona pandemic presents us with unknown operational and financial challenges.’
Image: Krisztian Bocsi/Bloomberg

Volkswagen AG said it’s almost impossible to predict the economic impact of the coronavirus pandemic spreading across its home turf that’s breaking supply links and forcing production shutdowns.

“The corona pandemic presents us with unknown operational and financial challenges,” VW Chief Executive Officer Herbert Diess said Tuesday in a statement ahead of the company’s annual earnings press conference. “We will succeed in overcoming the corona crisis by pooling our strengths and with close cooperation and high morale in our group.”

In its annual report, the German carmaker repeated a February forecast that it expected do deliver about as many vehicles worldwide this year as it did in 2019. It said it would maintain its target operating profit margin of between 6.5% and 7.5% return on sales, excluding special items.

In the past week, Europe has emerged as the new epicenter of the virus that started out in China and is also spreading in the US Countries are restricting movement, making it harder to keep factories open and move parts around. Carmakers from PSA Group and Fiat Chrysler Automobiles NV to VW are suspending production in the region.

Diess signaled dangers last week in a Bloomberg TV interview, when he said that while China, VW’s biggest market, was showing signs of recovery, he was concerned about Europe.

It’s unclear how severely or for how long VW will be affected, Chief Financial Officer Frank Witter said in Tuesday’s statement.

“Currently, it is almost impossible to make a reliable forecast,” Witter said. “We are making full use of all measures in task force mode to support our employees and their families and to stabilize our business.”

The company’s media briefing will be webcast for the first time to support safety measures including avoiding larger crowds of people.

Volkswagen shares fell 12% on Monday amid a global market rout, and are down 45% for the year.

Automakers are navigating “a landscape of plummeting worldwide demand” as workers quarantine in China, Europe and the US, Bloomberg Intelligence analysts Kevin Tynan and Michael Dean said in a report.

© 2020 Bloomberg

 

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