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VW whacked by new model costs
Frankfurt, Germany (CNN) -- Volkswagen said on Wednesday profits tumbled by two-thirds in the first quarter of 2003 as a result of sales falling, the euro strengthening and spending on new rival models rising. Europe's biggest car maker made a net income of 202 million euros ($230 million) in the three months to March 31, down from 627 million euros a year ago. Sales fell 2.7 percent to 20.7 billion euros. Chief Executive Bernd Pischetsrieder expects a "substantial" improvement in operating profit during the course of the year as the company launches new vehicles. The vehicles will help the company hit its operating profit target, but they will be lower than last year's figures of 4.76 billion euros ($5.2 billion). "We expect operating profit to improve substantially in the course of the year, on the basis of increasing unit sales of our expanded and updated product rage -- in particular the models Touareg, Touran, Audi A3, Golf and the new generation Transporter," the company said in a statement. VW makes the New Beetle, Golf and Passat, and owns luxury marques Audi, Lamborghini and Bentley. Like other mass market car makers, VW is battling weak demand on both sides of the Atlantic, but its profits are under particular pressure as key models are aging at the same time and development costs for replacements pile up. In its biggest single market, Western Europe, sales fell 3.4 percent. Volkswagen has been losing market share to newer models from Peugeot, Citroen and Toyota Motor. But VW said its volume sales in the first quarter had risen 3.1 percent, driven largely by sharp gains in China, which overtook Germany to become its biggest market for the first time. VW (FVOW) stock rose 45 cents, or 1.4 percent, to 32.79 euros in midday Frankfurt trading on Wednesday.
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