Volkswagen bails out firm that sells Seat vehicles
Company has accumulated losses of 19 million euros
If it were not for the financial support of parent Volkswagen Group Retail, Seat Motor España, the company that groups together the network of official concession holders for the sale of its vehicles, would go under, according to a recent audit by PricewaterhouseCoopers (PwC).
Seat Motor España lost 3.6 million euros last year and has accumulated losses of 19.3 million since it last turned a profit five years before. PwC said the economic problems of the company “indicate the existence of significant uncertainty about its ability to meet its financial commitments and continue its operations.” The auditor said Seat Motor would be unable to pay its suppliers as demonstrated by the fact it closed 2012 with negative working capital.
Volkswagen Group Retail, which groups together the franchise networks for VW’s brands Audi, Volkswagen and Skoda in Spain, absorbed Seat Motor España in 2012.
PwC also said that as a result of the losses it has accumulated, Seat Motor closed 2012 with a net worth of 417,000 euros, less than half its share capital of 1.84 million. Consequently, Seat Motor in June approved a reduction in its share capital to 60,000 euros, the minimum required of a limited company in Spain.
Seat attributes the problems to the economic crisis. Sales of cars have fallen sharply since 2007, and the turnover of all franchise holders in Spain declined from 41.957 billion euros to 22.135 billion last year. As a result, more than 1,300 vehicle sales outlets have been closed, while those that remain find themselves in a very precarious financial situation.
Seat Motor’s nine outlets last year sold 5,138 new vehicles, down 31 percent from a year earlier. That is a greater contraction than for the manufacturer Seat as a whole, which sold about 55,000 cars last year, a fall of 25 percent from a year earlier.
Seat Motor is normally responsible for sales of fleets of vehicles to public administrations, which have embarked on a severe austerity drive. It also sells to car-hire firms, whose purchases have similarly been hit by the crisis.
Seat Motor’s turnover last year amounted to 110.7 million euros, down 28 percent from a year earlier. In 2008 when the crisis started to hit hard, sales were 193.2 million euros.
Seat Motor predicted that its absorption by Volkswagen Group Retail would generate synergies in the form of shared resources and services. The company reduced its workforce last year by 25 employees to 452. The main victim of the layoffs were members of its management team, whose ranks have been slimmed from 27 to 14.
Seat itself booked a loss of 30 million euros last year, the third year in a row that it has failed to turn a profit. In 2012, Germany took over from Spain as the main market for Seat-brand vehicles.