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Volkswagen to Spend $40m for New Center

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Volkswagen AG (VLKAY) is planning a $40 million investment to set up a warehouse in Roane County, Tenn. The new warehouse will supply domestic auto parts for the Passat vehicle, which is manufactured in Volkswagen’s Chattanooga plant in Tenn.

The warehouse spans across 400,000 square foot and is expected to start operation from early spring 2013. Initially the new facility will operate as a redistribution center for the service warehouses. It will eventually expand to add parts distribution center, which will support the U.S., Canadian and Mexican operations.

The parts distribution center is expected to boost service parts delivery times to more than 100 dealers. Moreover, the facility will create 45 jobs by 2016.

Headquartered in Wolfsburg, Germany, Volkswagen is a prominent player in the automotive industry along with Daimler AG (DDAIF), General Motor Company (GM), and Fiat SpA (FIATY). The company is engaged in developing vehicles and engines, production and sale of passenger cars, commercial vehicles, trucks, and buses.

Volkswagen posted a 37.6% fall in earnings to €4.18 ($5.50) per share in the first quarter of 2013 from €6.70 in the same quarter of 2012. Net earnings declined 35.2% to €2.0 billon ($2.7 billion) from €3.1 billion in the year-ago quarter.

The fall in earnings was attributable to lower revenues generated from the company’s Automotive segment owing to deteriorating European markets. Revenues in the quarter dipped 1.6% to €46.6 billion ($61.5 billion).

Revenues from the Automotive segment fell 3.5% to €41.1 billion ($54.3 billion) while operating profits from the segment ebbed 31.7% to €1.9 billion ($2.5 billion) from €2.8 billion a year ago. However, revenues from the company’s Financial Services segment grew 15.8% to €5.4 billion ($7.2 billion) while operating profit grew 21.3% to €416 million ($549.1 million) from €343 million a year ago.

Volkswagen, a Zacks Rank #2 (Buy) stock, aims to become the world’s largest carmaker both in terms of sales and profitability by 2018 based on the strength in emerging markets, including Brazil, Russia, India and China.

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