VW proposes 35% dividend increase, settles class action emissions lawsuit

FRANKFURT/HAMBURG — Volkswagen Group said its full-year operating profit rose 22% to 16.9 billion euros ($18.5 billion) thanks to strong sales of higher-margin cars and lower diesel charges, defying an industry downturn that has cut the earnings of rivals.

Volkswagen is in the midst of ramping up sales of sports utility vehicles, which command better profits than ordinary cars, to 40% of passenger car sales from below 25% in 2018, while diesel related fines and settlements fell to $2.54 billion, down from $3.53 billion a year earlier.

Its strong performance led the car and truck making group to propose a dividend hike to 6.50 euros ($7.18) per ordinary share, up from 4.80 euros ($5.30) and 6.56 euros ($7.24) per preferred share, up from 4.86 euros ($5.37) in 2018.

Earlier this month rivals Ford and Daimler posted weaker earnings hit by trade wars and higher spending to build low emission cars.

VW predicted vehicle deliveries this year would be stable at 2019 levels despite a declining market.

“The paring back of diesel charges is positive but I am skeptical that they can keep their outlook given the dip in China sales thanks to corona,” Nord LB analyst Frank Schwope said.

Group vehicle deliveries rose 1.3% to $12.12 million last year, thanks to gains in Europe and south America as sales in Asia and the United States fell amid trade tensions.

The Wolfsburg-based company said market share rose in almost all regions, resulting in the rise in operating profit to $18.66 billion, which was up from $15.35 billion in 2018.

In terms of the operating profit for the group and the passenger cars division, VW forecast an operating return on sales in the range of 6.5% to 7.5% in 2020, but said this depended on external factors such as the geopolitical climate and the coronavirus outbreak.

MINORITY SHAREHOLDER BUYOUT OFFER

Volkswagen also said on Friday it had offered to buy out minority shareholders in its premium brand Audi, via a so-called squeeze-out offer.

Volkswagen AG already holds 99.64% of the registered share capital of Audi AG.

“In the context of reorganizing competencies and responsibilities, Volkswagen AG plans to carry out a squeeze-out according to German stock corporation law in order to acquire the 0.36 percent of Audi’s shares,” VW said.

A resolution on the squeeze-out, in line with German stock corporation law, is to be passed by Audi AG’s Annual General Meeting. The AGM was originally scheduled for May 14 but will now be postponed until July or August.

CLASS ACTION SETTLEMENT

Also on Friday, Volkswagen and a major German consumer group said that they had reached an 830 million euro $916.65 million agreement in a class action lawsuit over the carmaker’s rigging of diesel emissions tests.

The deal marks a further step in the German carmaker’s efforts to make amends after it admitted in 2015 to using illegal software to cheat U.S. diesel engine tests.

The effort has cost Volkswagen more than $30 billion in vehicle refits, fines and provisions.

In the deal announced Friday, the $917 million will be divided among about 260,000 members of the class action. The exact amount depends on the age and model of the owner’s car.

Nearly all U.S. owners of affected cars agreed to take part in a $25 billion settlement in 2016 in the United States, but VW has said there was no legal basis for consumers in Germany to seek compensation due to differences in law.

An initial attempt to reach the $917 million settlement with VZBV failed this month, for which VW blamed demands for $55.2 million in fees by lawyers representing the consumer groups.

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