Volkswagen Revs Up Pressure on GM


By Phil LeBeau, CNBC Correspondent

NEW YORK ( CNBC) -- As annual profits go, Volkswagen hit it out of the park.

In fact, the record profit the German automaker announced at its annual meeting on Monday will have a lot of people wondering why it made nearly triple the amount of money GM did last year.

Overall, VW posted a net profit of $20.1 billion dollars with annual revenue surging 26% to $207.1 billion. Yes, some of the VW profit was helped by a revaluation gain on the options it holds to buy a remaining 50.1% of Porsche. Still, the staggering 58% jump in operating profits shows just how successful last year was for VW.

Compare those figures with General Motors. GM made $7.6 billion last year. By all accounts, it was a fantastic year for GM, especially coming just two years after bankruptcy. But with VW breathing nipping at the heels of GM to become the world's largest automaker, it's worth comparing GM and VW. And for that, one figure stands out. In 2011, VW made approximately $55 million every day while GM made approximately $21 million.

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So why the difference?Both automakers are racking up sizable profits in China. And while GM made the bulk of its money in the U.S., VW continues to struggle here. By comparison, Volkswagen is still profiting in Europe while GM lost $700 million in that continent.

One key differentiator between GM and VW is the strength of their luxury divisions. Cadillac is largely a North American brand, just starting to grow overseas. For Volkswagen, there is a portfolio of strong earnings contributors including Bentley and Porsche. And then there is Audi. It generated more profits for VW than any other brand. Audi's operating profit last year surged by $2.6 billion.

In 2011 VW sold 1.3 million Audi vehicles around the world. It was the 16th best-selling brand of the year. Cadillac? GM sold just under 200,000 last year, making it the 52nd best-selling brand in 2011. Watch Audi over the next two years. It will be a key player in Volkswagen's stated goal of eclipsing GM to become the world's top automaker. In terms of profit, the German automaker has already far exceeded GM.

--Written by Phil LeBeau at CNBC

CNBC is a world leader in business news, providing real-time financial market coverage and business information.

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