Volkswagen raised slightly its 2008 earnings outlook today and pledged to restore the lustre to its VW brand by increasing productivity and capacity usage at its plants, boosting its shares to a new high.
The world's fourth-largest automaker forecast pretax profit in 2008 would exceed the €5.1 billion previously targeted, and reaffirmed operating profit this year would surpass €4.38 billion despite tough markets.
VW stock was up 3.2 per cent at €103.20 by 1552 GMT, having touched a record high of €103.56, making it the biggest gainer on the German blue chip DAX.
"Recent speculation about the truck alliance with MAN and Scania already boosted the shares and now they are really bullish about this and next year, so the overall sentiment is very positive and people think that this will continue," Helaba equity strategist Christian Schmidt said.
VW chief executive Martin Winterkorn confirmed that Volkswagen was considering whether to spin off its entire commercial vehicles business - not just heavy trucks operations - into a combined MAN-Scania group that would be Europe's truck market leader if merger talks work out.
"Over the next 10 years the Volkswagen brand will develop into the most innovative volume manufacturer with the best quality in its class," the CEO said, explaining that he wanted it to become "more glamourous and have a sharper profile".
Chief Financial Officer Hans Dieter Poetsch added that the group needed no new cost-cutting plan once For Motion Plus ends in 2008, five years after its first restructuring began. Nor will its German staff levels decline beyond the original reduction of 20,000 jobs announced early last year, VW said.
The carmaker expects an after-tax return on investment of at least 9 per cent in the medium term, a target Poetsch said its core VW brand could reach in the foreseeable future following years of losses, although market conditions are deteriorating.
Excluding one-offs, the group's ROI rose 2.9 percentage points to 5.8 per cent last year but it still did not cover its cost of capital. Poetsch also expected VW's investments would become more generous with its automotive capex-to-sales ratio to be just under 6 per cent in the medium term.