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Tuesday, 22 February, 2000, 20:01 GMT
Big drop in VW profits

VW beetle
Even record sales could not balance the books


Europe's biggest car maker, Volkswagen, has reported profits down by 26%.

The company, which makes VW, Audi, Seat, Skoda and Bentley cars, turned in net profits of 1.65bn deutschmarks ($847.1m), down from 2.24bn deutschmarks ($1.16bn) in 1998.

But the company said that excluding the one-off charges resulting from changes in German tax laws, net profits showed a decline of only 9%.

However, that is still bigger than analysts had forecast.

Continued investment

Production was up 0.6% to 4.85m vehicles, and sales grew by 9.5% to 147bn deutschmarks.

VW said it would continue to invest heavily in research and development in order to keep hold of and strengthen its position in key markets.

Investment last year was 16.5% more than in 1998.

The company said it was expecting an improvement in the overall economic environment.

"On this basis, we expect a further rise in unit sales and turnover and higher earnings," it said in a statement.

Further details of the 1999 figures will be published at the group's annual news conference on 23 March.

Buying spree

VW has been under pressure from rivals such as Ford and Peugeot Citroen to keep its prices low.

A decline in Latin America and Africa was offset by strong growth in Western Europe and buoyant sales in North America.

The company has invested heavily in developing luxury cars by acquiring Bugatti, Bentley and Lamborghini. It also plans to build a top range VW marque car.

VW has cut production costs by building several models using common chassis and components as part of its so-called platform strategy.

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