Financial Positions

FINANCIAL POSITION AND CASH AND CASH EQUIVALENTS IN THE GROUP

The Volkswagen Group’s financial position in fiscal year 2012 was affected by the contribution in full of Porsche’s operating automotive business, the further increase in the equity interest in MAN SE, the acquisition of Ducati and the successful placement of the mandatory convertible note. The following sections provide an overview of the Group’s liquidity development and outline the drivers by division.

The Volkswagen Group’s gross cash flow in the reporting period amounted to €20.1 billion, €1.2 billion more than in the previous year. Funds tied up in working capital increased by €2.5 billion to €12.9 billion, which resulted in a year-on-year decline in cash flows from operating activities to €7.2 billion (€8.5 billion).

At €16.8 billion, investing activities attributable to the Volkswagen Group’s operating activities were up 5.2% on the prior-year figure in 2012. Of this figure, €10.5 billion (€8.1 billion) was attributable to investments in property, plant and equipment. Net cash flow declined by €2.1 billion to €–9.6 billion.

Since the consolidation of MAN, further increases in Volkswagen AG’s stake have been reported in financing activities as capital transactions with noncontrolling interests. Further interests in MAN SE totaling approximately €2.1 billion were acquired in the reporting period. The issuance of a mandatory convertible note led to a cash inflow of €2.5 billion, €2.0 billion of which was classified as a capital contribution and increased net liquidity.

Cash and cash equivalents in the Volkswagen Group as reported in the cash flow statement amounted to €17.8 billion as of December 31, 2012, €1.3 billion higher than in the previous year. Gross liquidity rose by €3.5 billion to €32.1 billion. Net liquidity in the Group was €–85.5 billion (€–64.9 billion).

FINANCIAL POSITION IN THE AUTOMOTIVE DIVISION

Gross cash flow in the Automotive Division increased to €15.8 billion (€15.4 billion) in fiscal year 2012 due to earnings-related factors, although higher tax payments had a negative effect. Despite the increased business volumes, strict working capital management led to the release of €0.5 billion (€1.7 billion). Overall, cash flows from operating activities amounted to €16.2 billion (€17.1 billion).

At €16.5 billion, the cash outflow from investing activities attributable to operating activities in the reporting period was €0.5 billion higher than in the previous year. Investments in property, plant and equipment rose by €2.3 billion to €10.3 billion; the ratio of investments in property, plant and equipment (capex) to sales revenue was 5.9% (5.6%). We invested mainly in our production facilities and in models that we launched in 2012 or are planning to launch in 2013. These are primarily the ŠKODA Rapid, as well as the successor models to the Golf, the Audi A3, the Audi A4, the Audi A6, the ŠKODA Octavia, the SEAT Leon, the Porsche Boxster and the Porsche 911 Carrera. Other investment focuses were the ecological focus of the model range and the switch to the Modular Transverse Toolkit. Capitalized development costs rose to €2.6 billion (€1.7 billion). Within investing activities, a cash outflow arose from the contribution in full of Porsche’s automotive business to the Volkswagen Group. The payment of the consideration in the amount of €4.5 billion was net of cash and cash equivalents acquired from Porsche, while the liabilities assumed directly reduced net liquidity. The acquisition of Ducati resulted in a cash outflow of €0.7 billion. The acquisition of Porsche Holding Salzburg and the increased stake in MAN SE had a considerable effect on investing activities in the previous year. The Automotive Division’s net cash flow declined by €1.3 billion to €–0.2 billion.

The Automotive Division recorded a cash inflow of €2.6 billion from financing activities (previous year: cash outflow of €4.3 billion). This reflects the proceeds from the issuance of bonds and the issuance of a mandatory convertible note, dividend payments and the further increase in the stake in MAN SE.

Following the integration of Porsche and Ducati, the increase in the stake in MAN SE and the successful placement of a mandatory convertible note, net liquidity in the Automotive Division amounted to €10.6 billion (€17.0 billion) at the end of fiscal year 2012.

Financial position in the Passenger Cars and Light Commercial Vehicles Business Area

Gross cash flow in the Passenger Cars and Light Commercial Vehicles Business Area was roughly on a level with the previous year at €13.8 billion, and was negatively impacted by higher income tax payments. Funds of €1.9 billion (€1.3 billion) were released from working capital despite the increase in volumes. Cash flows from operating activities therefore increased year-on-year to €15.6 billion. The cash outflow from investing activities attributable to operating activities was on a level with the previous year, at €15.2 billion (€15.5 billion), and was significantly affected by the integration of Porsche and the acquisition of Ducati. Investments in property, plant and equipment and capitalized development costs rose by 25.1% and 44.8%, respectively. Net cash flow improved from €–0.5 billion in the previous year to €0.4 billion.

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FINANCIAL POSITION IN THE PASSENGER CARS AND LIGHT COMMERCIAL VEHICLES BUSINESS AREA
€ million		2012		2011
Gross cash flow		13,750		13,733
Change in working capital		1,877		1,326
Cash flows from operating activities		15,627		15,060
Cash flows from investing activities attributable to operating activities		–15,232		–15,544
Net cash flow		395		–484

Financial position in the Trucks and Buses, Power Engineering Business Area

Gross cash flow in the Trucks and Buses, Power Engineering Business Area was €2.0 billion (€1.6 billion) due to earnings-related factors and higher tax payments. In the comparison with the previous year’s figures, it should be noted that MAN was consolidated on November 9, 2011. Funds of €1.4 billion were tied up in working capital in the reporting period, after funds were released from working capital in the previous year. As a result, cash flows from operating activities declined to €0.6 billion (€2.0 billion). At €1.2 billion, the cash outflow from investing activities attributable to operating activities was higher than in the previous year (€0.5 billion) and includes the acquisition of MAN TRUCKS India Private Limited. Net cash flow declined sharply by €2.2 billion to €–0.6 billion.

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FINANCIAL POSITION IN THE TRUCKS AND BUSES, POWER ENGINEERING BUSINESS AREA
€ million		2012		2011
Gross cash flow		2,028		1,648
Change in working capital		–1,423		401
Cash flows from operating activities		605		2,049
Cash flows from investing activities attributable to operating activities		–1,223		–454
Net cash flow		–618		1,596

FINANCIAL POSITION IN THE FINANCIAL SERVICES DIVISION

The Financial Services Division’s gross cash flow was €4.3 billion in 2012, up 24.2% on the previous year due to earnings-related factors. Funds tied up in working capital increased to €13.3 billion (€12.1 billion) as a result of volume growth and the resulting higher financial services receivables, as well as changes to leasing and rental assets. The cash outflow from investing activities attributable to operating activities rose to €0.4 billion. A cash inflow of €11.2 billion (€12.6 billion) was recorded from financing activities as a result of the increased business volume, including from the issuance of bonds. The Financial Services Division’s negative net liquidity, which is common in the industry, widened by €–14.3 billion as against the previous year to €–96.1 billion (€–81.8 billion) as of December 31, 2012. This was mainly due to the expansion of business activities and the enlargement of the consolidated Group.