VOW3 Volkswagen AG

By William Boston 

BERLIN -- Two of Germany's largest auto makers reported sharp falls in earnings, revenue and new-car sales for the first three months of the year. Volkswagen AG and Daimler AG's results are a measure of the impact on manufacturers of the auto industry shutdown that was part of the drive to contain the coronavirus pandemic.

German auto makers suspended swaths of production in Europe, the U.S. and China for weeks after Covid-19, the disease caused by the new coronavirus, spread world-wide. Both Volkswagen and Daimler, two of Europe's largest manufacturers, saw pretax earnings slide more than 80% in the quarter as a result.

European auto makers and their suppliers have furloughed more than a million auto workers across the continent. Even as factories begin to reopen, most are operating at a fraction of their previous output levels, making it difficult to forecast for the rest of the year.

"We have taken numerous measures to lower costs and secure liquidity," Frank Witter, Volkswagen's chief finance officer, said in a statement.

Net profit at Daimler, which makes Mercedes-Benz cars fell to EUR94 million in the first quarter from EUR2.1 billion the year before.

Volkswagen, the world's largest auto maker by sales, reported EUR405 million in net earnings after a 25% drop in production to just under two million vehicles in the first three months of 2020.

As the virus spread in Europe and the U.S. in February and March, it was beginning to recede in China, the world's biggest car market by sales. Auto makers, including Daimler and Volkswagen, have reopened their plants in China and are gradually reviving output, but demand for new cars and production remain well below levels at the same time last year.

Volkswagen said in its first-quarter report that "positive impulses came from the developing economic recovery in China."

Still, the damage to the auto industry from slumping demand and efforts to contain the virus by locking down large parts of the global economy is widespread and could be long-lasting.

Ford Motor Co. this week reported a $2 billion pretax loss in the first quarter, which it attributed to the impact of the pandemic on its global business. Nissan Motor Co., Japan's second-largest auto maker after Toyota Motor Corp., said Tuesday that it expected to report a net loss, its first in more than a decade, of up to $885 million in its fiscal year that ended on March 30.

As global auto sales slump, auto makers are cutting expenses and securing loans to ensure that they have sufficient cash to weather the coming months should demand fail to return to precrisis levels and the economic slump worsen.

Daimler, which has been bleeding cash as a result of big investments in new technology, said the outflow of capital worsened in the first quarter, as negative cash flow in its industrial businesses widened to EUR2.3 billion in the first quarter.

Volkswagen reported negative cash flow of EUR2.5 billion in the first quarter, but said net liquidity had risen 11% in the same period to EUR17.8 billion.

U.S. auto maker Ford said it has about $35 billion in cash, which it described as sufficient to weather the storm for months.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

April 29, 2020 04:19 ET (08:19 GMT)

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