VW sees strong first-half profits despite chip shortage

German auto giant Volkswagen said Friday that it expected to report improved sales and profits for the first half, in preliminary results ahead of an earnings report later this month.

The company also has decided to extend the contract of chief executive Herbert Diess until October 2025, it added later.

"Deliveries to customers of the Volkswagen Group continued to recover strongly in the first half of the current year, leading to a very strong Group turnover as well as a very high operating profit," the initial company statement said.

Operating profit is expected to reach around 11 billion euros ($13 billion) in the first six months of 2021, it said ahead of its scheduled earnings report on July 29.

A global shortage of semiconductors that hurt production had "shifted and will rather impact us" in the second half of the year, it added.

The carmaker had reported first-quarter net profits of 3.4 billion euros, up from 517 million euros in January-March 2020 when the first wave of the pandemic closed showrooms and factories.

The supervisory board has now renewed its support for Diess, who was named chairman of the board in 2018 with a mandate to shake up traditional ways of operating in the wake of the "Dieselgate" emissions cheating scandal.

Diess tangled with VW's powerful unions several months ago and they accused him of serious management errors around the launch of crucial models.

He has turned the German automaker unwaveringly towards electric vehicles, a growing trend in the auto sector, and a compromise with the unions was reached at the end of last year.

This year's results now appear to be headed in the right direction with sales for the 12-brand group, which also includes the Audi, Porsche and Skoda brands, gaining 13 percent in the first half to 62.4 billion euros.

Like other carmakers, VW has been grappling with a supply crunch of semiconductors as the pandemic boosts demand for crucial microchips also needed for consumer electronics.

The chip shortage has forced VW to trim auto production at some plants and put thousands of workers on shorter hours, delaying car deliveries.

VW had already said in February that it nevertheless expected group revenue in 2021 to be "significantly higher" than last year, while car deliveries would also be "significantly up" on 2020.

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