The war in Ukraine could affect the car industry: what Volkswagen says

Volkswagen said Russia’s invasion of Ukraine and its impact on supply chains could affect business this year.

The Volkswagen Group doubled its operating profit in 2021, but warned that Russia’s invasion of Ukraine and its impact on supply chains could affect business this year in unforeseen ways.

Operating profit doubled to 19.3 billion euros last year, despite lower deliveries, VW said in a statement.

Global vehicle sales for the multi-brand group, whose brands include VW, Porsche, Audi and Skoda, fell 6.3% to 8.6 million last year due to a microchip shortage, VW said.

The doubling of operating profit was due to higher prices and a more favorable product mix, the company said.

VW aims to increase its annual dividend by more than half, to 7.50 euros per common share and 7.56 euros per preferred share.

The carmaker’s VW, Audi, Porsche and Skoda brands were forced to cut production after Russia’s invasion of Ukraine stopped supplying key wiring produced in Ukraine.

Automakers are struggling to find alternative sources of vital parts produced in Ukraine from places as far away as China and Mexico, as the Russian invasion halts assembly lines and breaks complex supply chains.

The industry is going through a volatile stage

“The conflict has an impact on the entire global economy, on raw materials, on supply chains, and therefore on our company,” Volkswagen chief financial officer Arno Antlitz told reporters on Friday.

“The impact of this cannot be conclusively assessed at this time,” he said, adding that the group is currently working to call on other suppliers in Eastern Europe and North Africa to obtain wiring.

The company said it expects an operating margin of 7.0% to 8.5% in 2022, compared to 7.7% in 2021.

“However, this guide is subject to the further development of the war in Ukraine and in particular the impact on the group’s supply chains and on the global economy as a whole,” VW said.

The carmaker expects vehicle deliveries to increase by 5% to 10% this year.