Volkswagen's E4 billion operating profit last year was the group's second best ever, but Chairman Bernd Pischetsrieder warns this year won't be as good.
"We will not be able to match the 2002 operating profit," he said. "Due to profound changes and considerable uncertainty in the economic and political framework, results for the first quarter of 2003 will be significantly lower" than the first three months the previous year.
Pischetsrieder faces fresh challenges in his second year as chairman. VW group will launch 20 new models or derivatives this year, including a fifth-generation Golf.
"With so many new models in the pipeline to succeed an aging model lineup, we are at the low end of our cycle," a senior VW marketing manager said. "We really have to fight ourselves through this year."
VW must also combat falling industry sales in Europe and the USA.
"Generally lower car markets, lower unit volumes, currency fluctuations and pricing pressures will take a toll," said Michael Newman, a marketing analyst at ABN-AMRO in London.
But VW expects substantial sales growth this year in China and Pischetsrieder projected that total unit sales would again top 5 million.
Financial analysts say that compared with BMW or Porsche, VW had not hedged as aggressively on euro-dollar rates.
"If the euro gets stronger, that might affect VW's full year results negatively," Newman said. "Our internal forecast for VW's 2003 pre-tax profit is E3.25 billion."
VW will absorb the bulk of the costs of launching a new-generation Golf this year.
"But that car won't contribute to this year's results before the fourth quarter," Newman said.
Pischetsrieder said VW would cut capital spending by 10 percent this year because of expected lower sales and a corporate strategy of limiting investments to 7 percent of revenue.