FINANCIAL POSITION AND CASH AND CASH EQUIVALENTS IN THE GROUP
The financial position of the Volkswagen Group in 2008 was dominated by extensive investing activity and the acquisition of the Scania shares. The following sections give an overview of the Group’s liquidity development and outline the operating factors by division.
The Volkswagen Group recorded gross cash flow of €14.0 billion (€14.7 billion) in the reporting period.
After working capital recorded a cash inflow of €1.0 billion in the previous year, the Group posted a cash outflow of €3.2 billion in 2008. Consequently, cash flows from operating activities fell to €10.8 billion (€15.7 billion).
Net cash used in investing activities increased by 46.3% year-on-year to €19.7 billion; as a result, net cash flow fell by €11.1 billion to €–8.9 billion.
The Volkswagen Group reported cash and cash equivalents of €9.4 billion (€9.9 billion) as of December 31, 2008. At €17.3 billion, gross liquidity was down €1.8 billion on the previous year. Net liquidity in the Group decreased by €13.3 billion to €–52.2 billion.
FinanCIAL POSITION IN THE AUTOMOTIVE DIVISION
At €11.1 billion (€11.9 billion), the Automotive Division’s gross cash flow fell short of the high prior-year figure, principally due to higher income tax payments. Following the release of funds recorded in previous years, funds tied up in working capital came to €2.3 billion; this was largely attributable to higher receivables and inventories as a consequence of the difficult market situation. Cash flows from operating activities therefore fell by 35.9% to €8.8 billion.
Investments in property, plant and equipment in the Automotive Division during the reporting period were up 48.5% year-on-year to €6.8 billion. The ratio of investments in property, plant and equipment to sales revenue (capex) was at the upper end of our expectations at 6.6% (4.6%). The majority of investments related to the new production facilities and to models that we launched in 2008 or are planning to launch in 2009, primarily the new Audi Q5 and the successors to the Polo, Gol, Golf, Audi A4, Škoda Superb, SEAT Ibiza and Multivan/Transporter. Capitalized development costs, at €2.2. billion, were significantly higher than in 2007 due to the large number of new products. Furthermore, the acquisition of additional shares in Scania led to an increase in net cash used in investing activities of €4.9 billion year-on-year to a total of €11.5 billion. As a result, the net cash flow generated by the Automotive Division fell by €9.8 billion to €–2.7 billion. Adjusted for the inclusion of Scania, the net cash flow would have been slightly positive.
With regard to financing activities, the Automotive Division recorded a cash inflow of €0.9 billion following the outflow in the previous year. Cash and cash equivalents decreased by a total of €1.3 billion to €7.6 billion (€8.9 billion) at the end of the reporting period. At €8.0 billion (€13.5 billion), the net liquidity of the Automotive Division remained at a high level as of December 31, 2008.
Financial position in the financial services division
The Financial Services Division’s gross cash flow rose slightly year-on-year to €2.9 billion in 2008. Increased reductions in liabilities in particular led to funds of €0.9 billion (€0.8 billion) tied up in working capital. Cash flows from investing activities rose to €8.3 billion (€6.9 billion) due to the increase in receivables from customer and dealer financing. Additional miscellaneous financial liabilities attributable to the growth in business volume pushed up financing activities to €7.2 billion (€5.0 billion). Cash and cash equivalents amounted to €1.8 billion at the end of the reporting period. After accounting for securities and loans, the gross liquidity of the Financial Services Division was €4.0 billion (€3.1 billion). Third-party borrowings rose to €64.3 billion (€55.5 billion); this year-on-year increase is mainly attributable to the expansion of business and the consolidation of Scania. The negative net liquidity – common to the industry – in the Financial Services Division thus increased by €7.9 billion to €–60.3 billion.