Profits are up, but is there still cause to worry about VW?

We've been all over the Geneva Motor Show the past couple of days and there's an awful lot to report in terms of new concepts and product unveilings. Europe's biggest fish of all, Volkswagen, hasn't had a grand-slam show, but they've unveiled the new Phaeton (the current Phaeton flopped in the US but did well in Europe) as well as the new Golf Variant, a.k.a. Jetta Wagon. Also announced was a critical 1.9L diesel for the Passat. A recent Detroit News article, however, points to a lack of product as a cause for worry at VW, and investors are weighing in on both sides of the arguement.

Although VW had a financially successful 2006 with profits of $5.7 billion and a stock price that has doubled in 18 months, some in the investment community are beginning to worry about a lack of product in the pipeline. When CEO Bernd Pischetsrieder and VW brand Chief Wolfgang Bernhard were let go, new VW boss Martin Winterkorn ordered many new models back to the drawing board. Citigroup sees momentum slowing considerably in 2007, noting the drying product pipeline and launch delays. The investment firm also points to 'high-spending' Chairman Ferdinand Piech as a reason to worry about cash-flow in the near future.

[Source: Detroit News]

The Tiguan concept is one of the products rumored to be delayed by Winterkorn

Morgan Stanley actually likes what they're seeing from VW, especially because of Audi. The investment firm sees Audi outpacing the growth of BMW in the next five years by a factor of three. Audi has been on a roll lately with 11 consecutive sales bumps and an ambitious goal to become the world's number one luxury car manufacturer by 2015.

Some investors are worried that the best-selling Golf is four years old (though it is much newer to buyers in the US) but it is still a sales leader and a contributor to VW's bottom line. The Detroit News notes that the company also takes an astonishing 48 hours to make a Golf which makes it all the more amazing that they're taking their sweet time in production while still making big profits. The long build times of the Golf can in part be attributed to past management and gives Piech and co. something to improve upon.

Even with any evidence pointing to the contrary, it's hard to say VW is in trouble with a very strong partner in Porsche, $5.7 billion in profits, booming stock, and a high-flying Audi brand. Ultimately time will tell if the VW pipeline is drying up but the boys and girls over in Wolfsburg have done a good job with what they already have.