Volkswagen Group said the full year outlook for 2020 "can no longer be achieved" due to the current COVID-19 pandemic, which has had a significant impact on the group's business. The automotive company said in a statement that preliminary figures show that sales revenue for the first quarter of 2020 is expected to be around US$59 billion. According to Reuters, this is a drop from its initial estimate of US$65 billion. It also expects an operating profit of about US$978 million, and Reuters specified that this is an 81% decrease from about US$5.2 billion last year.
The company added that it is currently not possible to determine when a new outlook can be made for the full year. "The impacts resulting from the pandemic on customer demand, the supply chain and production cannot currently be accurately forecasted," Volkswagen said.
According to Volkswagen, its network has largely come to a standstill, and the resulting decline in customer demand and supplier bottlenecks have led to production stops within the group. Meanwhile, the group said in a statement that its automotive net cashflow amounted to negative US$2.7 billion, with the main drivers being the weaker underlying operating result due to the pandemic and negative effects in working capital from higher inventories and lower liabilities.
"The group has already implemented extensive counter measures to reduce costs. Securing liquidity has the highest priority and optimising working capital and prioritising investments are key focus areas," it added.
The company is also planning the phased restart of production with enhanced safety standards for the workforce. Volkswagen added that as seen from the positive developments in China, economic recovery during the course of the year appears possible.
It joins several other companies that have withdrawn their outlook for the year, including McDonald's, Porsche, Diageo, ViacomCBS, and Uber. Separately on the agency side, WPP, Publicis Groupe, Omnicom Group and Dentsu Aegis Network have also implemented cost-cutting measures to weather the COVID-19 storm. These included salary cuts and hiring freeze.