VW, Peugeot, Fiat earnings beat estimates

VOLKSWAGEN AG, PSA Peugeot Citroen and Fiat SpA reported earnings that beat analysts’ estimates and forecast higher revenue as record fuel costs spurred sales of the Golf, Peugeot 308 and Fiat 500 compact models.

Peugeot rose the most in more than five years in Paris trading and VW jumped 7.1 per cent in Frankfurt.

Volkswagen’s net income surged 35 per cent, beating the 5.7 per cent predicted by analysts, and Peugeot said first-half operating profit rose to 3.6 per cent of sales, ahead of a full-year target. Fiat advanced 14 per cent in Milan on a 27 per cent jump in sales in Brazil.

“Peugeot and maybe Volkswagen will buck a downward profit trend in 2008,” said Howard Wheeldon, senior strategist at London-based BGC Partners LP. “The European carmakers that suffer most” will be the manufacturers with less trade outside western Europe and the US, he added.

Peugeot’s sales jumped 1.6 per cent to 31.3 billion euros (us$49.3 billion) on demand for small cars including the 207 model.

Volkswagen introduced an upgraded Audi A4 and a coupe version of the Passat, helping boost sales 4.5 per cent in the second quarter to 29.5 billion euros as its Golf remained the company’s bestseller. VW expanded in China with the Lavida and New Bora models.

Volkswagen and Peugeot, the largest European carmakers, have fired workers in the western part of the continent to restrain costs. VW is also trying to cut more parts out of each piece of steel.

Automakers are squeezed by an overall slump, brought on by soaring oil prices and higher costs for raw materials including steel, up about 60 per cent this year.

European car sales fell 7.9 per cent in June as consumer confidence sank to a three-year low.

“The overall message is that despite cost increases, European carmakers are able to compensate with higher industrial efficiencies,” said Renato Gargiulo, a Milan-based analyst at Centrobanca.

Turin-based Fiat, Italy’s largest manufacturer, will close four of six plants in Italy for three weeks and Renault SA, the French No. 2, is reducing output of the Laguna hatchback.

In the Us, General Motors Corp plans to cut jobs and sell assets after scrapping its dividend for the first time in 22 years. - Bloomberg