Financial Positions

Financial position of the Group

The Volkswagen Group generated gross cash flow of €26.0 billion in fiscal year 2016, up 59.7% on the prior-year figure. Funds tied up in working capital increased by €14.0 billion to €16.6 billion. The new special items recognized in the reporting period had a negative impact on gross cash flow and a positive effect on the change in working capital. Cash flows from operating activities declined by €4.2 billion to €9.4 billion.

At €16.8 billion, the Volkswagen Group’s investing activities attributable to operating activities in 2016 were up 8.2% on the previous year. Within this item, investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs (capex) of €13.2 (13.2) billion were on a level with the previous year, while capitalized development costs increased to €5.8 (5.0) billion. The “acquisition and disposal of equity investments” item comprises primarily the cash inflow from the sale of the LeasePlan shares; in the previous year, the item reflected the sale of the Suzuki shares. Net cash flow declined to €−7.4 (−1.8) billion.

Cash inflows from financing activities amounted to €9.7 (9.1) billion. These mainly include dividend payments and the issuance and redemption of bonds and other financial liabilities. In the previous year, they also included the issuance of hybrid notes.

At €18.8 (20.5) billion, the Volkswagen Group’s cash and cash equivalents reported in the cash flow statement decreased year-on-year.

The Volkswagen Group recorded net liquidity of €−107.9 billion as of 31 December, 2016, compared with €−100.5 billion at year-end 2015.

AUTOMOTIVE DIVISION NET CASH FLOW 2016
€ billion

Financial position in the Automotive Division

At €16.5 billion, the Automotive Division’s gross cash flow was €9.0 billion higher in fiscal year 2016 than in the previous year. The increase is attributable primarily to lower special items compared with the previous year and the higher operating profit before special items, while lower dividend payments by the Chinese joint ventures were a negative factor. The change in working capital of €3.8 (16.3) billion was significantly down on the previous year. The new special items recognized in the reporting period had a negative impact on gross cash flow and a positive effect on the change in working capital. Legal risks and vehicle recalls attributable to the diesel issue resulted in cash outflows in the reporting period. Cash flows from operating activities decreased by €3.5 billion to €20.3 billion.

Investing activities attributable to operating activities increased to €15.9 (14.9) billion. At €12.8 (12.7) billion, capex was on a level with the previous year. The ratio of capex to sales revenue was unchanged year-on-year, at 6.9 (6.9)%. We invested mainly in our production facilities and in models that we launched in 2016 or are planning to launch in 2017. These are primarily vehicles in the Tiguan, Atlas, Audi A4, Audi A6, Audi A8, Audi Q5, ŠKODA Kodiaq, SEAT Ibiza and SEAT Arona series, as well as the Porsche Panamera and the Porsche Cayenne. Other investment priorities were the ecological focus of our model range, growing drivetrain electrification and our modular toolkits. Capitalized development costs increased by €0.7 billion to €5.8 billion. Investing activities in the reporting period included the sale of the LeasePlan shares amounting to €2.2 billion, and in the previous year the sale of the Suzuki shares.

The Automotive Division’s net cash flow of €4.3 billion was down €4.6 billion compared with 2015.

In financing activities, a capital increase carried out by Volkswagen AG at Volkswagen Financial Services AG in fiscal year 2016 to finance the growth in business volumes and comply with the increase in regulatory capital requirements resulted in outflows of €1.2 billion. At the end of June, a total dividend of €0.1 (2.3) billion, which was considerably lower than in the previous year due to the diesel issue, was distributed to the shareholders of Volkswagen AG. In addition, the Automotive Division’s financing activities include the issuance and redemption of bonds and other financial liabilities and amounted to €−2.3 (−6.3) billion.

Net liquidity in the Automotive Division as of December 31, 2016 amounting to €27.2 billion was €2.7 billion higher than at the end of the previous fiscal year. This represents 12.5% of consolidated sales revenue.

At €13.9 billion, gross cash flow in the Passenger Cars Business Area in fiscal year 2016 was €9.2 billion higher than in the previous year. The increase was mainly attributable to higher earnings before special items and the considerable year-on-year decline in negative special items; negative factors were the lower dividends paid by the Chinese joint ventures. At €3.5 (15.5) billion, funds released from working capital were significantly lower than in the previous year. The new special items recognized in the reporting period had a negative impact on gross cash flow and a positive effect on the change in working capital. The diesel issue gave rise to cash outflows in the reporting period. Cash flows from operating activities decreased by 14.0% to €17.4 billion. Investing activities attributable to operating activities recorded a cash outflow of €13.4 (12.4) billion in the reporting period. At €10.9 (10.9) billion, capex was on a level with the previous year, while capitalized development costs rose by €0.8 billion to €5.0 billion. Transactions in the reporting period included the sale of the LeasePlan shares and in the previous year the sale of the Suzuki shares. Net cash flow declined by €3.7 billion to €4.0 billion.

At €2.5 (2.5) billion in the fiscal year, gross cash flow in the Commercial Vehicles Business Area was on a level with the previous year. The higher earnings before special items more than offset negative special items. €0.2 (0.8) billion was released from working capital, less than in the previous year. The new special items recognized in the reporting period had a negative impact on gross cash flow and a positive effect on the change in working capital. Cash flows from operating activities declined to €2.7 (3.2) billion. Investing activities attributable to operating activities recorded a cash outflow of €2.4 (2.3) billion, resulting in particular from investments for the new plant in Wrzesnia, Poland, the successor to the Volkswagen Crafter being built there starting in 2016, and the new generation of Scania trucks. At €0.3 billion, net cash flow in the reporting period was down €0.6 billion year-on-year.

The Power Engineering Business Area generated gross cash flow of €0.1 billion in the reporting period, thus falling short of the prior-year figure by €0.3 billion. The decrease was primarily attributable to the special items from restructuring expenses, which at the same time had a positive effect on working capital. At €0.1 (0.0) billion, this increased as against the previous year. Cash flows from operating activities declined to €0.2 (0.4) billion. Investing activities attributable to operating activities decreased by 4.9% to €0.2 billion. Net cash flow declined to €−0.0 (0.2) billion in the reporting period.

Financial position in the Financial Services Division

The Financial Services Division generated gross cash flow of €9.5 (8.8) billion in the reporting period due to earnings-related factors. Funds tied up in working capital amounted to €20.4 (18.9) billion due to growth in business volumes. Cash flows from operating activities amounted to €−10.8 (−10.1) billion.

The acquisition of the interest in ride hailing service Gett amounting to €0.3 billion was one of the factors behind the increase in investing activities attributable to operating activities to €0.9 (0.6) billion.

Volkswagen AG contributed a capital increase of €1.2 billion to the Financial Services Division’s financing activities in the reporting period to finance the expected growth in business in existing and new markets as well as to comply with the continued increase in regulatory requirements. Cash inflows from financing activities amounted to €12.0 (15.4) billion overall.

The Financial Services Division’s negative net liquidity, which is common in the industry, amounted to €−135.1 billion at the end of the reporting period, compared with €−125.1 billion at the end of December 2015.