A skeptical Automotive News Europe reader commented that Volkswagen's quest to topple Toyota as the world's No. 1 car company will bankrupt the German automaker. That won't happen soon, or likely ever.
VW has a cash pile of 19.6 billion euros ($27 billion), 9 billion euros more than at the start of the year. The cash surplus was boosted by record sales of 5.4 million new cars in the first nine months. The company expects 2010 unit sales to exceed last year's record level of 6.3 million cars, driven by high growth in China and booming sales at its Audi premium brand.
VW may use some of its huge "war chest" to achieve its target of selling 10 million vehicles earlier than its stated goal of 2018. It could, for example:
• Raise its stake in Suzuki to a controlling 51 percent, allowing it to consolidate Suzuki's car sales into its own. VW paid $2.5 billion in January for a near 20 percent stake in the Japanese automaker, whose unit sales were nearly 1.2 million last year.
• Buy Porsche outright. VW purchased a 49.9 percent stake in the sports car maker for 3.9 billion euros from owner, Porsche Automobil Holding SE, which has 6 billion euros of debt resulting from its failed attempt to take over VW. Europe's largest automaker has an option to buy the remaining 50.1 percent for another 3.9 billion euros. The purchase would add 150,000 annual sales, if Porsche reaches its goal of selling that many cars.
• Relieve Fiat of its money-losing Alfa Romeo brand, valued at up to 1 billion euros. Fiat CEO Sergio Marchionne plans for Alfa to become profitable by 2014 selling 500,000 cars, up from 102,000 last year. Marchionne says he won't sell Alfa, which Fiat acquired in 1986 to prevent Ford from buying it, but a cash offer from VW might prove hard to refuse.
"VW is generating enough cash to buy Alfa Romeo once a quarter ... VW can afford to do almost anything," Bernstein analyst Max Warburton wrote in a research note.
Are there any darks clouds on the horizon to console VW's rivals? Not at the moment, it seems. “VW is well positioned and faces no concrete risks for a notable weakening of its business,” wrote Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler.
