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VW brand profit soars as cost cuts materialise

Volkswagen said profit at its troubled core division soared in the first quarter, a sign that long-overdue cost cuts are materialising.

FILE: A street sign can be seen in front of the illuminated logo of German car maker Volkswagen (VW). Picture: AFP.

SHANGHAI - Volkswagen said profit at its troubled core division soared in the first quarter, a sign that long-overdue cost cuts are materialising as the carmaker pushes a post-dieselgate strategic shift.

First-quarter operating profit at Volkswagen's (VW) largest division by sales surged to $948.86 million from 73 million a year earlier, the carmaker said on Wednesday, joining rivals Daimler and BMW which have also reported better-than-expected quarterly results.

Structural changes since the diesel emissions scandal broke in 2015 include streamlining vehicle development, cutting material costs by reducing complexity in parts, dropping unprofitable models and shifting more power to brands and regions to respond more quickly to market needs.

Investors have said a turnaround at VW's namesake brand, which traditionally has been saddled with high fixed and R&D costs, is key to turn the German behemoth into a more appealing business, although VW last year eclipsed Toyota as the world's biggest selling carmaker.

"Our efforts to improve efficiency and productivity across all areas of the company are also paying off," Chief Executive Matthias Mueller said.

The carmaker's long-term goal is to lift the brand's operating profit margin to 4% by 2020 and 6% by 2025 from 1.8% last year, still lagging French rivals PSA Peugeot Citroen and Renault.

Group operating profit jumped 40% to €4.37 billion in the three months through end-March, one of the carmaker's highest-ever quarterly results, even as vehicle sales at the 12-brand group declined, another sign of VW's accelerating cost-savings drive.

Quarterly profit at luxury division Audi slipped to €1.2 billion from €1.3 billion a year earlier as VW's biggest earnings contributor is pushing new models and technologies.

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