More bad news for VW:
Triple Whammy Hits Volkswagen Stock
Thu Sep 2, 2004 10:29 AM ET
By Christiaan Hetzner
FRANKFURT (Reuters) - Slumping U.S. sales, an uneven showing in China and its ejection from a key stock index pushed Volkswagen AG shares lower on Thursday, further punishing Europe's worst-performing car stock this year.
Europe's biggest carmaker reported on Wednesday a 30 percent plunge in U.S. sales to 22,724 vehicles in August, extending a swoon amid a dearth of new models. Only its Touareg offroader was able to post a gain, it said.
So far this year, the German mass-market producer has sold fewer VW-brand cars in the U.S. market, it's third-biggest, than German luxury carmaker BMW.
While other mass-market companies like Ford and General Motors also suffered disappointing U.S. car sales, luxury brands Mercedes-Benz, BMW and Porsche all posted double-digit percentage increases.
Car sales at VW's main Chinese joint venture in Shanghai fell 7.1 percent in August versus July to 26,034 units, while sales at its First Automotive Works joint venture in Changchun rose 5.2 percent to 23,536 vehicles, it said on Thursday.
China is Volkswagen's second-biggest market.
Shares in VW slipped 0.9 percent to 31.53 euros, underperforming a 0.2 percent dip in the DJ Stoxx European autos index. The stock has fallen over 28 percent in 2004.
Adding to its misery, Dow Jones confirmed late on Wednesday that the stock would be excluded from the DJ Euro Stoxx 50 index, leaving Mercedes parent DaimlerChrysler as the sole remaining carmaker among the euro zone's top 50 blue chips.
A Volkswagen spokesman said the carmaker believed the move didn't accurately reflect the potential behind VW's ForMotion efficiency program and its ongoing model offensive. VW aims to return to the index, he said, but declined to give a time frame.
DENT TO PRESTIGE
Membership in the DJ Euro Stoxx 50 isn't purely a question of image. According to Dow Jones Indexes, passively managed index tracking funds have acquired shares in index components worth a total of about 57.2 billion euros ($69.09 billion).
That compares to just 27.7 billion invested in tracking the DJ Stoxx 50 blue-chip index, which includes Swiss, British and Swedish shares.
"The Euro Stoxx 50 is significantly more important than the Stoxx 50 for passively managed funds," said Klaus Stabel, head of research at the Frankfurt brokerage firm ICF.
A departure means these index trackers would have to dump their VW holdings, which by analyst calculations could total some 300 million euros.
"Naturally it's a question of prestige," he said, "but I don't think the expulsion from the Euro Stoxx 50 will lead to new 2004 lows (below 30.34)," he said, adding a valuation of just 8.6 times 2005 earnings offers downside support for VW.
Investment funds like UBS Global Asset Management back up Stabel's sentiment. Although its passively managed index tracker UBS Equity Fund Euro Stoxx 50 has 1.23 billion euros in assets under management, they won't have to sell any VW shares since they don't own a single one any more.
"The VW share is no longer included in our portfolio following our last asset allocation at the end of June," said a spokesman for the investment fund, adding that its fund managers had freedom to over- or underweight stocks within the index.
Daimler may be the only European automaker left in the index, but French peer Renault just missed out on taking VW's place.
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