German auto giant Volkswagen AG (VWAGY 1.18%) withdrew its guidance for 2020 amid uncertainty related to the COVID-19 pandemic that led to factory shutdowns and caused its operating profit to fall 77% in the first quarter. VW now plans to begin reopening some of its idled factories next week.
What Volkswagen said about its first-quarter results
VW won't report its full first-quarter results until April 29. But in a preview, it said that it expects to report:
- Revenue of 55 billion euros ($59.8 billion). It's Q1 2019 result was 60 billion euros.
- Operating profit of about 900 million euros. (Q1 2019: 3.9 billion euros.)
- Automotive net cash flow of negative 2.5 billion euros. (Q1 2019: positive 2 billion euros.)
VW said that as of March 31, it had automotive net liquidity (cash and credit lines available to its core automaking business, minus debt) of 17.8 billion euros. That's down from 21.3 billion euros on Dec. 31, 2019.
VW also said that the full-year guidance it provided in February is no longer accurate, given the widespread factory shutdowns and sales disruptions caused by the pandemic. "It is currently not possible to determine when a new outlook can be made for the full year," the company said, while emphasizing that the ongoing recovery in China suggests that it may be possible to get back up to full speed before year-end.
VW will start reopening its factories next week
The company said that it is planning "the phased restart of production" in Europe and elsewhere, with new measures in place to help keep workers safe from COVID-19.
The German government on Wednesday eased some restrictions on businesses, making it possible for VW and other German automakers to reopen some factories in the country next week. Several other European governments have made similar moves.
VW said that it currently plans to restart production of ID.3 electric hatchbacks at its plant in Zwickau, Germany, on April 20. Another VW plant, in Bratislava, Slovakia, will reopen on the same date, the company said. The Bratislava factory makes SUVs for the VW, Audi, and Porsche brands.
The automaker currently expects to restart its factories in the United States, Poland, Russia, Spain, and Portugal a week later, on April 27, and then to open factories in South Africa, Argentina, Brazil, and Mexico in early May.
In a statement, VW-brand chief operating officer Ralf Brandstatter said that the company has been preparing to reopen these factories for three weeks. Working with labor leaders, VW has put together an extensive safety plan to protect returning workers, while also helping suppliers get ready to resume their own production, he said.
The upshot: Autos will come back one step at a time
Since the COVID-19 outbreak began, auto investors have been watching for indications on when production and sales might begin to return to something like normal.
The grim reality is that it may be a long time before the global auto-manufacturing ecosystem is running at pre-pandemic levels. While it looks increasingly likely that at least some factories will be able to restart soon, it's not yet clear when buyers will be willing to return to dealer showrooms.