Oct. 27 (Bloomberg) -- Volkswagen AG, Europe's largest carmaker, said nine-month profit gained 77 percent as new models such as the Passat sedan and Audi A4 attracted customers.

Net income rose to 1.21 billion euros ($1.53 billion) from 685 million euros a year earlier, the Wolfsburg, Germany based carmaker said today in a statement on the DGAP newswire. Profit beat the 1.15 billion-euro estimate of 14 analysts surveyed by Bloomberg News. Nine-month sales climbed 12 percent to 77 billion euros.

As a result of higher unit sales and ongoing cost-cutting, ``full-year operating profit before special items will be higher than in 2005,'' Volkswagen said, reiterating earlier statements.

Chief Executive Officer Bernd Pischetsrieder has boosted sales by introducing 20 models last year, including new versions of the Passat sedan and Audi A4 luxury car. He has also sold non-carmaking units such as the Europcar rental business to pay for a restructuring that includes cutting as much as 20 percent of the western German workforce and lengthening the workweek.

Shares of Volkswagen fell as much as 1.95 euros, or 2.5 percent, to 75.25 euros are were down 1.1 percent to 76.38 euros as of 10:31 a.m. in Frankfurt.

Pischetsrieder, 58, on Sept. 29 reached an agreement with the IG Metall labor union to extend the workweek for employees in Germany by 4.2 hours without additional pay in exchange for product and investment guarantees. The carmaker also agreed to implement a profit-sharing program and pay a one-time sum of 6,279 euros into each employee's pension.

Truckmaking Alliance

The CEO has also been pushing in the last two months for a three-way combination between MAN AG, Scania AB and his Brazilian heavy truck unit to form Europe's largest truckmaker.

Volkswagen, which is the largest shareholder in both truckmakers, set a deadline of mid-November to reach a deal. Scania, Sweden's second-largest truckmaker, has so far rebuffed offers from German competitor MAN.

Pischetsrieder said last month Volkswagen was more than 75 percent of the way toward eliminating 20,000 German jobs as he works to reduce labor costs. Slightly fewer than 5,000 workers have signed up for buyout packages Volkswagen has offered since June, while another 11,000 employees have agreed to early retirement, he said then.

Volkswagen is using voluntary measures to reduce the workforce because it's bound by a November 2004 labor agreement guaranteeing employees' jobs in exchange for a wage freeze that will eventually save 2 billion euros annually.

Pischetsrieder, who received a five-year extension of his contract in May, has announced agreements since December to sell the Gedas information-technology unit, Bordnetze wire-harness division and Europcar as a way to cover the costs of the early retirements and buyouts. The company booked a second-quarter gain of 800 million euros on the Europcar disposal. Volkswagen said it restated last year's figures in today's report because of the Europcar sale.

Sales Increase

Volkswagen plans to boost sales by bringing 28 new models to market during the next two years. That includes a compact sport- utility vehicle, a new version of the Scirocco sport coupe and a minivan for the U.S. Increasing sales and reducing labor spending is critical to Pischetsrieder's plan to more than triple pretax profit to 5.1 billion euros in 2008 from 1.1 billion euros in 2004.

Volkswagen also wants to capitalize on expanding markets by setting up new assembly plants. It's investing 370 million euros to build a factory southwest of Moscow as economic growth in Russia encourages consumers to purchase expensive items. The carmaker has also chosen India's western state of Maharashtra as the site for an assembly plant that will eventually assemble 100,000 vehicles annually.

To contact the reporter on this story: Chad Thomas in Berlin at cthomas16@bloomberg.net.

Last Updated: October 27, 2006 04:38 EDT