Volkswagen reins in margin hopes as tariffs cloud prospects

By Victoria Waldersee

STUTTGART, Germany (Reuters) -Volkswagen said on Wednesday that profit margins this year were likely to be towards the bottom of its guidance range and joined a chorus of automakers warning that U.S. trade policy was making it almost impossible to make financial predictions.

The German group said it now expected an operating margin at the lower end of its 5.5-6.5% guidance range because of a profit warning by Porsche, in which it holds a 75% stake.

But that forecast doesn't include any potential impact from U.S. President Donald Trump's import tariffs, with finance chief Arno Antlitz telling analysts - despite their pleas - that it was too early to make conclusive statements.

"We stand ready to work with policymakers to find solutions to support the industry while preserving opportunities for workers," Antlitz said, emphasising the importance of Volkswagen's cost-cutting drive in an uncertain world.

Higher battery-electric sales, which more than doubled in Europe in the first quarter, also weighed on margins, Antlitz said, but added that the 25,000-euro ($28,400) ID.2 car being built in Spain could be the company's first EV to yield comparable margins to its combustion engine equivalent.

"There is still a lot of support necessary on the pricing side for battery-electric cars," Antlitz said.

COST CUTS

Automakers including Mercedes-Benz, Stellantis, General Motors and Volvo Cars have pulled their financial guidance, citing the uncertainty caused by constantly shifting tariff policies.

Porsche, which has no production in the United States, said on Tuesday that tariffs led to a hit of at least 100 million euros in April and May alone.

The Volkswagen Group is highly exposed to the tariffs, with premium brand Audi also lacking U.S. production, though it has said it plans to announce a location to build some of its top-selling models in the market this year.

The group was looking at scenarios to build more models in the U.S., including potentially at a new factory being built for its Scout brand in South Carolina, but no decisions had been made so far, Antlitz said.

Meanwhile, a cost-cutting programme agreed with unions late last year was well underway, with factory costs down at the VW brand and headcount reduced by about 7,000 people, Antlitz said.

"Rest assured that we continue to drive implementation of the agreed measures with full force," he added.

Volkswagen suffered a 40% drop in earnings in the first quarter, and now expects net cash flow this year towards the lower end of its forecast of 2 billion euros to 5 billion euros ($2.3-5.7 billion) and net liquidity close to 34 billion euros.

($1 = 0.8790 euros)

(Reporting by Victoria Waldersee in Stuttgart. Additional reporting by Amir Orusov in Gdansk. Editing by Thomas Seythal and Mark Potter)