No. of Recommendations: 4
article about VW from "Berliner Zeitung", a relatively small German newspaper I like because it's politically quite unbiased...
Danke schön, Said. I read the article and only had to look up a couple of words. Clearly they are very pessimistic about VW holding it's important 2-3 million unit sales in China (out of about 9 million units worldwide), and I think that pessimism is entirely justified. I still think that the ICE part of their business (Verbrenner, as they say in the article, literally 'burners') is going to have a pretty long tail, before battery vehicles take over completely in 15-20 years, but it is obvious that all the legacy builders are going to have to make that difficult transition at some point and they are probably all in trouble.
I don't currently have shares (I bought some more in the low 80s and sold them for a small profit when the price jumped back over 90), but I'm still interested. VW is trading at about 3x this year's expected profits, while Toyota is at 9x, with most of the same problems. So I think the legitimate pessimism from the catastrophic German energy situation, the difficult labour laws and traditions in Germany, the bad management, and their difficulties with software development) may already be adequately priced in, and any corrections to these factors could make this a profitable investment. I agree that the German labour situation is unlikely to change, but the high cost of energy in Germany could change rapidly if Germany can get Russian gas again, and high labour costs in Germany can be avoided as VW shifts production out of Germany (to China, Mexico, Slovakia, wherever) which it has been doing for decades. I'm not so optimistic about management and the chronic failure to develop better software, I think that is the real reason to worry that VW may be a value trap, with profits drifting down and even bankruptcy as a possibility.
At some price, even the worst company in the world might make sense as an investment, given that there's always a non-zero probability that they might turns things around. My reason for selling is that I am trying to reduce my overall exposure to stocks, to have at least 20% cash, so I have been culling my borderline investments like this one, but it's a fascinating story to follow anyways.
dtb
