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Volkswagen Says Earnings Gains Running Ahead of Schedule

The German auto maker expects to earn E5.1 billion in 2007 but warns of soft demand this year in Europe and North America.

Volkswagen Group raises its pre-tax profit outlook for 2007 to E5.1 billion ($6.9 billion), a forecast that puts the German company ahead of its earnings goal by one year.

At the same time, the company expresses concern over the potential effect of high energy and commodity prices on the automotive industry at large.

The world’s fourth-largest auto maker previously had said it expected year-over-year improvement in 2007 after posting an operating profit of E4.38 billion ($5.98 billion) in 2006. All the figures exclude special items.

“We have significantly improved our financial position,” Volkswagen Chief Financial Officer Hans Dieter Potsch says in a statement.

Volkswagen worldwide vehicle sales in the first six moths rose 7.8% to a record 3.1 million units, pushing revenue in the period up 5.7% to E54.9 billion ($74.9 billion) from E51.9 billion ($70.9 million).

Pre-tax earnings in the period jumped to E3 billion ($4.1 billion) from year-ago’s E751 million ($1 billion).

Volkswagen expects to deliver 6.1 million vehicles this year, which would set a new sales mark for the auto maker. “We have further improved our position in our most important markets,” Potsch says.

At the same time, the auto maker expresses concern over high energy and commodity prices that could dampen worldwide industry growth this year.

While Volkswagen expects overall new-vehicle registrations to slightly exceed like-2006, it warns of slow sales in Europe, particularly for Spain and Germany.

Additionally, it anticipates new-vehicle deliveries to fall into record negative territory in North America, while forecasting China and South America will drive global sales.

Volkswagen also predicts strong demand for its group brands in Asia/Pacific, South America and Central and Eastern Europe.

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