Photographer: Akio Kon/Bloomberg

Audi 2015 Operating Profit Drops 6.1% on Diesel Scandal Cost

  • Audi seeks to lift sales with revamped A4 and fresh SUV models
  • Fixing rigged U.S. cars to cost mid-double-digit million euros

Audi AG’s operating profit dropped 6.1 percent last year, hurt by the cost of fixing manipulated diesel cars and developing electric-vehicle technology.

Earnings fell to 4.84 billion euros ($5.26 billion) in 2015 from 5.15 billion euros a year earlier, the luxury-car manufacturer, Volkswagen AG’s largest earnings contributor, said Thursday. Revenue rose 8.6 percent to 58.4 billion euros, helped by higher deliveries and currency shifts. Spending related to the rigged diesel-engine issue amounted to 228 million euros, Chief Financial Officer Axel Strotbek said at a press conference. The cost of repairing vehicles in the U.S. will be in the “mid-double-digit” million-euro range, Chief Executive Officer Rupert Stadlersaid.

“We will ensure full transparency and we assure you: we will fix it,” Stadler said at the press briefing at Audi headquarters in Ingolstadt, Germany.

The results are an early look at how the scandal may have affected Volkswagen as a whole. The parent company postponed its own earnings report until at least April due to lingering questions about how resolving the manipulation scandal will affect finances. Maintaining Audi’s sales and profits is key for Volkswagen, the world’s No. 2 carmaker, as it faces billions of euros in costs triggered by its admission last September to cheating on emissions tests.

Volkswagen rose 0.4 percent to 116.20 euros as of 11:10 a.m. in Frankfurt, reversing a drop of as much as 3.1 percent earlier in the day. The stock has fallen 13 percent this year, valuing the parent company at 63.7 billion euros.

U.S. Talks

Audi has also been embroiled in the cheating. The luxury unit will recall about 2.3 million cars, about a fifth of those affected across the group, and it also developed one of the engines that U.S. authorities view as illegal. Talks over fixing the cars so they comply with diesel-emission rules stricter than those in Europe have been dragging on in the U.S. for months and will resume later Thursday.

About 90 percent of the affected vehicles are equipped with 2-liter engines, which require only a software update to comply with regulations, Stadler said. Hardware and software fixes will be required for 1.6-liter motors.

The manufacturer is seeking sales momentum this year with a new version of the best-selling A4 sedan and station wagon as well as fresh sport utility vehicles including the flagship Q7 model and the tiny Q2 unveiled at the Geneva International Motor Show this week. Audi reiterated a commitment to diesel-technology development Thursday as Stefan Knirsch, the division’s development chief, unveiled a high-performance version of the Q7 equipped with a turbocharged direct-injection diesel motor.

Audi dropped to third place in global luxury-car sales behind BMW AG and Mercedes-Benz last year due to an aging model lineup compared to its German rivals. Audi said Thursday that it plans to bring out 20 new or revised vehicles in 2016 and is forecasting a “moderate increase” in deliveries. Investments will amount to “more than 3 billion euros,” down from 3.53 billion euros in 2015.

The operating-profit margin last year amounted to 8.3 percent of revenue, compared with a 9.8 percent return on sales at Daimler AG’s Mercedes-Benz Cars division. BMW is scheduled to release 2015 results on March 16.

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