BERLIN -- Volkswagen said operating profit declined 3.1 percent in the second quarter as emerging-market volatility and a plunge in earnings at its core passenger-car division weighed on earnings.
Operating profit fell to 3.33 billion euros ($4.46 billion), from 3.44 billion euros a year ago, VW said in a statement today.
Group revenue dropped 2.2 percent to 51 billion euros amid "significant negative exchange rate effects," VW said, adding: "The weak currencies of key emerging economies pushed prices up and thus put pressure on demand."
Operating profit at VW's namesake brand tumbled by more than one third to 572 million euros ($765.4 million) reflecting falling sales, spending on technology and high fixed costs. By contrast, premium brand Audi, which contributes more than 40 percent to group profit, reported a single-digit gain.
The profit decline reinforces the pressure on VW to cut costs. CEO Martin Winterkorn has already called on VW managers to increase cost-cuts to 5 billion euros per year from 2017 in a bid to boost the brand's flagging profitability.
"The pressure to cut costs is definitely up now," said Hanover-based NordLB analyst Frank Schwope. "There's no doubt that VW must work on its margins."
"In light of the continued strong competitive pressures, the tense situation in some emerging economies and the fundamental technical and economic changes happening in our industry, we are working hard to create all the conditions we need today to ensure success tomorrow," Winterkorn said in the statement.
Economic imbalances and currency slides in developing markets are hurting European automakers as demand in their home region revives after a six-year slump. VW group sales have declined in double-digit terms this year in Brazil, Russia and India which, together with fast-growing China, accounted for about half of VW's 9.73 million record 2013 deliveries.