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VW swallows 20% profit drop but still set for world leader crown

vwlogosThe car maker Volkswagen has seen its profits plummet by 20% in the wake of its diesel emissions scandal.

It recorded a pre-tax profit of €3.2 billion in the three months to March but this was down from nearly €4 billion the previous year.

Vehicle sales continued to decline and negative exchange rates also had an impact, the company said.

In April, VW reported its first annual loss in more than 20 years for 2015, in part due to having to double the money set aside for the numerous lawsuits around the world related to the scandal. The fund now stands at €16.2 billion.

Sales of vehicles now carrying the VW marquee did better - Porsche, the Czech brand Škoda and the Spanish marque Seat delivered higher sales and operating profits, limiting the erosion of profits.

VW-branded cars were the worst hit.

But the plunge in sale has not been as deep as some analysts forecast, with some believing that VW would struggle to survive. So far, at least, customer loyalty has been greater than feared and the effect of the scandal has been costly but not deadly.

Despite its troubles, the carmaker is poised to become the biggest vehicle manufacturer in the world, overshadowing Toyota and General Motors.

It remains to be seen what the final bill is for the impending lawsuits and what shareholder reaction will be.

Last September VW admitted installing software in 11 million diesel vehicles to deceive strict US emissions test. It subsequently agreed to repurchase nearly 500,000 cars and compensate owners in the US, but not in Europe where, the company says, requirements are lower for diesel emissions so there is less work to do on affected vehicles.

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