BERLIN — Volkswagen is still managing to make money despite an emissions scandal. It is just not making money selling Volkswagens.
The brand problem, a persistent issue for years, has only gotten worse since the company admitted last year that it deceived regulators about how much its diesel cars were polluting. And Volkswagen is dealing with a significant drag, as the company on Tuesday reported a 19 percent drop in profit.
The brand breakdown is stark, underscoring how difficult it will be for Volkswagen to improve its image and to buff up its broader financial picture.
The carmaker barely broke even during the quarter on cars wearing the familiar Volkswagen badge, a “VW” inside a circle. Nearly two-thirds of its profit came from the Audi and Porsche divisions, which sell far fewer cars and have not been as closely associated with the scandal.
Its latest report also hinted at the lurking challenges that Volkswagen is likely to face in months and years to come. Sales in Russia and Brazil are plunging. Profit margins are shrinking in China. Sales are nearly flat in Volkswagen’s European stronghold.
Still, it could have been worse. All in all, the earnings report Tuesday showed that while the scandal has hurt Volkswagen, it has not destroyed the company.
Volkswagen’s quarterly profit of $2.7 billion was better than analysts had forecast. It was also an improvement from the loss in the last three months of 2015.
“They are far from making the massive losses we would expect if the damage was that big,” said Christian Stadler, a professor at Warwick Business School in Coventry, Britain, who follows the company.
Volkswagen’s portfolio mix isn’t exactly ideal in the current crisis environment.
The company makes most of its money from a relatively small number of luxury cars, like Porsche, Audi, Bentley, and Lamborghini. Golfs, Passats, and other Volkswagen-brand cars account for the largest share of sales by far.
But Volkswagen makes almost no money on those brands.
The low profitability of the Volkswagen brand is likely to add to pressure on the company to cut production in Germany, where costs are highest. But any cuts in Germany are extremely difficult because of Volkswagen’s exceptionally powerful workers council, which has special rights to veto plant closures.
The figures Tuesday also confirmed that the emissions scandal was having the biggest effect on the company’s reputation and sales in the United States. Car deliveries in the United States, including the Audi and Porsche brands, fell 6 percent in the quarter.
Adding to the drama, the carmaker has been forced to give buyers rebates and other incentives to prop up sales of the Volkswagen brand, just to that lackluster level. “They had to do that less with other brands,” Stadler said.
While the United States accounts for a relatively small share of total Volkswagen sales, it accounts for the biggest share of the company’s legal troubles. Volkswagen is in talks with the US government and with lawyers for customers about the size of fines and legal settlements related to the scandal.
In April, Volkswagen set aside $18 billion to cover legal costs, and some analysts expect that figure to rise.
Most of the money relates to proceedings in the United States. Laws in European countries do not provide as much scope for governments or customers to seek redress.
In Europe, where Volkswagen is the largest automaker but has been losing market share, the number of cars delivered rose 1.5 percent during the quarter. The one bright spot on the map for Volkswagen was China, the company’s largest single market, where deliveries rose 6 percent during the quarter to 954,000 vehicles.
But even in China there were signs of trouble. In a footnote, the company said that operating profit there fell 27 percent. Stadler of Warwick Business School said the likely reason was that Volkswagen was slow to introduce a low-priced SUV for the Chinese market, a popular vehicle category there.
Volkswagen signaled a tough year ahead because of the emissions scandal and other risks, such as volatile commodity prices.
Cost cuts and gains in China will only partly compensate. Sales revenue could fall by as much as 5 percent compared with 2015, the company said.
“In light of the wide range of challenges we are currently facing,” Matthias Mueller, the Volkswagen chief executive, said in a statement, “we are satisfied overall with the start we have made to what will undoubtedly be a demanding fiscal year 2016.”