The first quarter results that Volkswagen has obtained is exactly what Porsche Chief Executive Wendelin Wiedeking has expected it would be when he opted to increase his controlling stake in Europe’s largest automaker. The operating profit that Volkswagen—Europe’s largest automaker and manufacturer of top-of-the-line VW Beetle Part– has gained for the first three months of 2007 has increase to 81 percent or $1.48 billion creating a 4.1 percent margin. The profit after tax of $1.0 billion has increased by 127 percent.

The VW brand division was the dominating brand for the first quarter sales drive but the star performers were Audi and Skoda. The soaring sales of new models at the Czech-based Skoda have been able to deliver an 8.5 percent operating margin—surpassing even the premium auto maker BMW. Skoda’s car sales increase by 15.5 percent in the first quarter resulting from its sales of Octavia compact and Roomster station wagon.

Volkswagen’s premium luxury unit Audi has also continued to be a strong force for Volkswagen recording 9.4 percent for its global sales or $11.8 billion fueled by the success of some of its models like the new Audi TT roadster and the Q7 SUV. First quarter profit at Audi has increased by 16 percent to $545 million.

Audi and Skoda combined comprised 69 percent of Volkswagen’s automotive profit that is despite being dwarfed by sales of Volkswagen brand vehicles. The Volkswagen brand was able to record $525 million or a 21 percent operating margin which is a tremendous increase as compared to the $66 million loss that it has gained in the first quarter of 2006.

Volkswagen against the Toyota

Despite the remarkable first quarter results obtain by Volkswagen it still faces big challenges especially since the controlling shareholder, Porsche’s Wiedeking wants the German giant to outperform the presently world number one automaker, Toyota. For Volkswagen, this would mean redoubling cost-cutting efforts, increasing production efficiency, boosting parts sharing, and above all fix its money-losing US operation.

As Winterkorn continues revamping Volkswagen his additional task now would be the development of a real export powerhouse that can compete with ToMoCo. Despite the huge revenues that Volkswagen receives still the fact remains that its success is largely centered on Europe—Western and Easter Europe comprised 62 percent of the total VW sales while only 4 percent is derived from the giant US market.

Analysts say that if Volkswagen wants to take on Toyota it has to build serious sales muscle in the US where it was only been able to sell 397,000 cars last year. In order to penetrate the US market, Winterkorn is betting on new models that would include a van scheduled for released in 2008. The VW CEO is hoping that the van’s low cost and improved quality will attract car buyers. CEO Winterkorn will also formulate new marketing strategies to further boost sales in the US.

Improving Quality

The new CEO of Volkswagen is a quality-obsessed engineer that aims to sow in Volkswagen the type of product planning, manufacturing, component sharing as well as quality expertise that he has previously instilled at Audi during his tenure as CEO.

The new CEO would like to change the management style that the company has been used to. It can be remembered that due to the poor planning at Volkswagen in that past has resulted to pileups of new products that were introduced in a short span of time and puncturing sales.

Volkswagen needs also to redouble its efforts in China and other Asian markets, where car industry is booming since the big US and European markets are beginning to stagnate. Volkswagen ranks number two in China with General Motors taking the number one spot. Last year VW has been able to sell 711,186 cars in China up by 24.3 percent.

Volkswagen’s shares have increased by 35.5 percent sustained by the Porsche’s desire in raising its shares in Volkswagen. VW shares rose by 0.4 percent last May 2 to €111.75 ($152) on the Frankfurt exchange.

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Benjamin Hudson works as a supervisor at one of the top engineering firms in the business district of Louisiana. He is also a freelance journalist and has passion for anything automotive.