VW Cuts Dividend After Profits Fell 71 Percent

If you thought Volkswagen AG automotive group was one of the strongest there is, especially after the devastating crisis hitting the auto industry last year, you should think again. In a time of job cuttings and plant closures, VW group bought half of Porsche AG and announced its 25.8bn EUR three-year investment plan, building quite the dominant image in the auto industry.

Volkswagen AG just unveiled it has suffered a 71 percent drop in operating profits last year, exceeding the company’s initial fears. The brand’s share price dropped on Friday due to disappointment over its profitability in the fourth quarter of 2009, autonews.com reported.

"The (VW) Group's sales revenue and operating profit for 2010 are expected to exceed the prior-year figures despite a shift in volumes between the markets. Interest and exchange rate volatility will remain a drag on profit," announced Volkswagen.

Of course the group said it eyes recovery and keeps close to its goal of overtaking Japanese car maker Toyota on the long run, but for the moment VW said it would cut down dividend payouts. To give you the financial details, the company’s operating profit plunged 71 percent to 1.86bn EUR ($2.53bn) last year.

VW proposed a 17 percent dividend cut to 1.66 EUR per preferred share. The company’s voting shares are controlled by the Porsche and Piech families, Qatar and its home German state of Lower Saxony.

In December last year, Volkswagen reached an agreement with Japanese automaker Suzuki on the purchase of 19.9 percent treasury stake for 222.5 billion yen ($2.49 billion), looking to take advantage of Suzuki’s great exposure to the rising Indian market.