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Volkswagen Enjoys Rise In Profits Despite Cost Cuts

By Shor M. Rae , May 04, 2017 07:11 AM EDT
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VW emissions scandal: EU seeks more powers over national car regulations
Volkswagen is starting to bounce back from the results of its diesel emission scandal as profits soar in this year's first quarter. (Photo : Sean Gallup/Getty Images)

Amidst the recent reveal that a number of automaker companies have suffered a decline in sales, Volkswagen, on the other hand, is experiencing a burst in their profits. The news was revealed after the German automaker had to make cost cuts.

Volkswagen Bounces Back From Emission Scandal

The surge in the German automaker’s profit was a positive surprise especially after going through a well-known cost-cutting phase. In September 2015, they went through a difficult stage when they were hit with a diesel emission scandal. The United States Environmental Protection Agency (EPA) issued them a notice revealing that they violated the Clean Air Act

It was found out that Volkswagen deliberately reprogrammed their diesel engines during the laboratory testing to meet the country’s standards while doing the regulatory tests. This scandal took a toll on the company, ordering them to pay a criminal fine of $2.8 billion for cheating on the government-issued emission tests. The US Trade Commission also sued Volkswagen in March 2016 for false advertising after promoting their diesel-powered vehicles to be environment-friendly.

Consumers Still Have Faith In Volkswagen

When the emission scandal took place, a number of people revealed that they still had great faith in Volkswagen despite the huge shortcomings. This was clearly shown in the recent figures where the German automaker has seen a 40% increase in the profits in the first quarter of 2017. Volkswagen was also forced to make structural changes after the said scandal, resulting in cutting costs and focusing on their profitable products and markets.

Chief executive Matthias Mueller revealed that most of their profit came from “solid earnings in Western Europe” and the favorable exchange rates added to their benefit. He said that the efficiency and productivity measures they have made had finally paid off. He added that the rise in their profits has strengthened their resolve as an automaker.

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