Volkswagen on July 23 provided more confirmation that emerging markets are propping up the European car industry. The German automaker registered sales decreases in Western Europe and North America but racked up solid gains in Latin America and Asia, helping to deliver a 22% increase in second-quarter operating profit, to $3.35 billion.

VW joined France's PSA Peugeot Citroën and Italy's Fiat in reporting earnings that defied pessimism about the global auto industry. Shares of all three companies surged as investors demonstrated a newfound interest in makers of smaller, fuel-efficient vehicles.

But there may also be hidden peril in Volkswagen's emerging-markets success.

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Volkswagen's Strong Performance Surprises Analysts

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