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ECONOMY

VW welcomes Porsche takeover while thinking global

Germany's Volkswagen, Europe's biggest car company, vowed Thursday to become "the best auto manufacturer in the world" and welcomed a looming takeover by luxury carmaker Porsche.

Published: 13 March 2008 14:32 CET
VW welcomes Porsche takeover while thinking global

VW also said that early 2008 sales underpinned a trend that saw the group post record results last year, while chairman Martin Winterkorn told reporters at VW’s headquarters in Wolfsburg that “we are pleased” Porsche planned to raise its VW holding to more than 50 percent from around 31 percent at present.

“The Piech and Porsche families have written automobile history. They have been closely associated with the Volkswagen group for a long time,” Winterkorn said in reference also to Ferdinand Piech, a former VW boss who currently heads the Porsche supervisory board.

“A new automobile enterprise is now taking shape that will open an entirely new era,” Winterkorn stressed. “Our competitors understand the enormous potential of this partnership.”

“We know a player is emerging here that with its reach, its profitability and and its innovative force, will be the best auto manufacturer in the world.”

Porsche’s pending takeover of VW has been strongly opposed by unions who fear VW workers will lose considerable influence over the combined group. Meanwhile, the German auto giant forecast improved sales and operating profit this year from the record levels reached in 2007.

In January and February, sales of all VW brands had already gained 10.5 percent to 952,000 units, on strong results from VW vehicles, which gained 12 percent, the Czech-made Skoda, up by 18 percent, and utility vehicles which advanced by 18 percent as well, according to figures released at a press conference.

Sales early last year had been hampered however by a marked increase in the German value-added tax. But the numbers allowed VW to reaffirm its goal of increasing 2008 sales and operating profit, the company said, without providing detailed figures.

VW is counting on stronger results from emerging economies, while markets in western Europe and the United States were expected to stagnate.

For 2007, VW had already posted in late February an 50 percent jump in net profit to €4.1 billion and launched its “Strategy 2018” plan aimed at passing Japanese rival Toyota and becoming the world’s biggest auto manufacturer by that date.

Pre-tax profit, the group’s benchmark, had shot past its target of €5.1 billion to €6.5 billion last year.

All of VW’s eight brands posted positive results, the company said on Thursday, including the weaker Spanish Seat division, which turned in a small operating profit of €8 million.

Audi, the group’s high-end line, contributed €2.7 billion to the overall results.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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