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May 04, 2022 01:58 AM

VW sees better chip supplies boosting output

The automaker expects the shortage of semiconductors to ease during the second half and contribute to a surge in production.

from wire reports
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    VW Wolfsburg press shop 2021

    VW has paused production at its Wolfsburg factory several times over the past 12 months due to parts shortages. Shown is the plant's press shop.

    FRANKFURT -- Volkswagen Group stuck to its outlook for the current year after its global production network helped it offset supply chain disruptions caused by the war in Ukraine and the coronavirus pandemic.

    The automaker expects the shortage of semiconductors to ease during the second half and contribute to a surge in output.

    Global carmakers, like many industrial sectors, face a scarcity of key components in the wake of COVID-related lockdowns and Russia's invasion of Ukraine, compounding an ongoing shortage of semiconductors.

    VW has had to pause production at some factories in Europe, either because suppliers of wire harnesses in Ukraine were unable to deliver components or because it didn't have enough microchips.

    "We used our position as a truly global company to balance production across our markets and relieve pressure where there were supply issues and product shortages," CEO Herbert Diess told journalists on Wednesday.

    "For example when we had to cut back production in Europe due to a lack of wiring harnesses and in some areas had to shut down plants, we sent the semiconductors we didn't need to other regions," Diess said.

    VW said in a statement that it expects sales to rise between 8 percent and 13 percent and an operating profit margin of 7.0 percent to 8.5 percent in 2022. The company said its global set-up allowed it to prioritize regions and high-margin products.

    Diess pointed to uncertainty from the conflict in Ukraine and the pandemic, adding the company could not currently foresee the full impact a deterioration of the situation would have, including a possible ban on Russian energy imports.

    VW, which reported preliminary results for the first quarter last month, reported sales of 62.7 billion euros ($66 billion) for the first three months, up 0.6 percent year-on-year.

    On Wednesday, the automaker said price increases for its volume brands and customers choosing "well-equipped" premium vehicles had helped to offset a drop in production.

    Strong demand in the sport and luxury brand group, in particular for the Porsche 911, Panamera and Cayenne, helped boost operating profit in the division to 1.4 billion euros and deliver an operating margin of 18.6 percent.

    VW confirmed plans to list Porsche in a partial initial public offering in the fourth quarter.

    Reuters and Bloomberg contributed to this report

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