BMW predicts a bright future

VW's result came hot on the heels of news from its competitor BMW which also saw its shares fall despite reporting a record 60% rise in pre-tax profits for 2001 late on Monday.

"We also expect that in 2002 BMW's [business] will continue in a positive trend and therefore assume a significant improvement in key figures," BMW's chief executive Joachim Milberg said in a statement.

"Out of all the companies, they've probably got one of the better product pipelines coming through," added UBS Warburg auto analyst Xavier Gunner.

But not everyone agreed with the optimistic outlooks. One investment bank was mulling a downgrade of BMW, seeing more value in the VW and DaimlerChrysler shares.

BMW shares were trading 0.75 euros lower at 44.05 euros in early evening trade on Tuesday.

Investors had already taken the expected profits rise into account with some suggesting BMW shares now looked expensive.

Uncertain future

Meanwhile, Volkswagen's failure to make any predictions also pressured its stock, with VW shares trading 1.32 euros lower at 56.78 euros shortly before the close.

Dr Pischetsrieder: Profits this year will at least match last year's

VW said its earnings would "depend on the automobile demand in the various market regions", which does not bode well, given that most analysts predict already sliding car sales will continue to fall in most markets globally.

Consequently, VW shares - which had already gained 24% since the start of the year - fell 2.6% in early trading, even though the company announced that its 2001 pre-tax profits rose 18.6% to more than 4.4bn euros (�2.7bn; $3.9bn).

"At the moment there are no reasons to buy the share and the cautious forecast certainly does not change that," said DZ Bank trader Stefan Buchholz.

Holding strong

And yet, it was not all bad news from the German car maker which owns the Seat, Skoda, Audi and Volkswagen brands.

VW predicted that it would increase its current 12.4% global market share as other car makers suffered from falling sales.

It believes its own sales will hold up well because it has recently launched several new models.

VW's incoming chairman and chief executive Dr Bernd Pischetsrieder predicted that the group's profits should at least match last year's.

In an interview with BBC News Online last week, Dr Pischetsrieder said that he thought "the most important objective for a car manufacturer has to be that even in downturns of the market, you are profitable".

"It's very easy to be profitable when there is a booming market, but it's not so easy when the market is in the doldrums."

In VW's key markets, in the US and Germany, recessions caused sales to slip late last year and early this year.

"The German and US markets will be the determining factors," VW said.

"I believe that overall the US economy will see a quicker recovery than Europe, but we are prepared to perform well in times of declining sales," Dr Pischetsrieder said in another interview with the German newspaper Welt am Sonntag.