Financial Position

PRINCIPLES AND GOALS OF FINANCIAL MANAGEMENT

Liquidity management, currency, interest rate and commodity risk management, as well as credit and country risk management, are the core elements of financial management at the Volkswagen Group. This is performed centrally for all Group companies except Scania by Group Treasury, based on internal directives and risk parameters.

With regard to liquidity, the goals of financial management are to ensure that the Volkswagen Group remains solvent at all times and to achieve an adequate return from the investment of surplus funds. The aim of currency, interest rate and commodity risk management is to hedge the prices on which investment, production and sales plans are based using derivative financial instruments. The goal of credit and country risk management is to use diversification to avoid exposing the Volkswagen Group to the risk of loss or default.

To achieve this diversification, internal limits are defined for the volume of business per counterparty when entering into financial transactions. In setting these limits, various rating criteria are taken into account, including the ratings awarded by independent agencies and the equity base of potential counterparties. The Executive Committee for Liquidity and Foreign Currency approves risk limits, authorized financial instruments, and hedging methods and horizons.

For more information on the principles and goals of financial management, please refer to the Notes to the 2009 Consolidated Financial Statements chapter Financial risk management as well as to the Risk Report chapter Financial risks.

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CASH FLOW STATEMENT BY DIVISION
		Volkswagen Group				Automotive1				Financial Services
€ million		2009		20082		2009		20082		2009		20082
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions. 2 Adjusted. 3 These relate mainly to fair value measurement of financial instruments, application of the equity method and reclassification of gains/losses on disposal of noncurrent assets to investing activities. 4 Before consolidation of intra-Group transactions: €13,306 million (€8,774 million). 5 Cash and cash equivalents comprise cash at banks, checks, cash-in-hand and call deposits, excluding time deposit investments.
Profit before tax		1,261		6,608		603		5,677		657		931
Income taxes paid		–529		–2,075		–265		–1,973		–264		–102
Depreciation and amortization expense		8,877		8,438		6,740		6,680		2,137		1,758
Change in pension provisions		135		140		130		132		5		8
Other noncash income/expense and reclassifications3		–118		583		–623		429		505		154
Gross cash flow		9,626		13,694		6,585		10,944		3,040		2,750
Change in working capital		3,116		–10,992		6,230		–2,144		–3,114		–8,848
Change in inventories		4,155		–3,056		3,820		–2,688		335		–368
Change in receivables		465		–1,333		750		–1,130		–285		–203
Change in liabilities		260		815		193		1,100		67		–285
Change in other provisions		1,525		369		1,457		382		68		–13
Change in leasing and rental assets (excluding depreciation)		–2,571		–2,734		–48		–105		–2,523		–2,629
Change in financial services receivables		–719		–5,053		57		297		–777		–5,350
Cash flows from operating activities		12,741		2,702		12,8154		8,8004		–74		–6,098
Cash flows from investing activities		–10,428		–11,613		–10,252		–11,479		–176		–134
of which: acquisition of               property, plant and               equipment		–5,963		–6,896		–5,783		–6,773		–180		–122
capitalized development costs		–1,948		–2,216		–1,948		–2,216		–		–
acquisition and disposal of equity investments		–2,669		–2,596		–2,667		–2,571		–3		–25
Net cash flow		2,313		–8,911		2,563		–2,679		–250		–6,232
Change in investments in securities and loans		753		430		509		496		244		–66
Cash flows from financing activities		5,536		8,123		5,497		942		39		7,181
Changes in cash and cash equivalents due to exchange rate changes		190		–113		155		–57		35		–56
Net change in cash and cash equivalents		8,792		–471		8,724		–1,298		69		827
Cash and cash equivalents at Dec. 315		18,235		9,443		16,362		7,639		1,873		1,804
Securities and loans		7,312		7,875		5,701		5,679		1,611		2,196
Gross liquidity		25,547		17,318		22,063		13,318		3,484		4,000
Total third-party borrowings		–77,599		–69,555		–11,427		–5,279		–66,172		–64,276
Net liquidity		–52,052		–52,237		10,636		8,039		–62,688		–60,276