VW profit plunges, sees tough year-end

Europe's largest carmaker Volkswagen said business remained hard after third-quarter earnings plunged on Thursday while Japan's Mazda <7261.T> predicted a smaller full-year operating loss.

Car sales are heavily dependent on the state of the economy and consumer confidence. The Euro zone consumer sentiment index surged in October while in Japan, industrial production rose for a seventh consecutive month in September including an 8.2 percent rise in car production.

Mazda, Japan's fifth-largest automaker in which Ford Motor Co holds a 13 percent stake, cited better sales and currency rates than expected, saying it now expected an operating loss of 12 billion yen for the year to March, 1 billion yen less than it had forecast earlier this month.

Volkswagen , Europe's largest automaker by sales, warned that the business climate remained tough and said it still expected earnings to decline in 2009.

The group's preferred shares , more liquid than its ordinary stock, were up 3.84 percent at 1037 GMT (6:37 a.m. EDT) at 67.80 euros, while the DJ Stoxx European Autos Index <.SXAP> rose 1.48 percent.

Car sales in Germany, Europe's largest car market, have risen in recent months after the government introduced a generous scrapping incentive scheme launched by the government to reward drivers for trading in old cars for new models. But with the scheme's funds now exhausted, sales are expected to tumble once more.

Still, the company said it should be able to gain market share at the expense of its competitors even if markets were falling.

In China, one of the last bastions of auto sales growth despite the crisis, the group's retail sales in the first nine months exceeded those in Germany for the first time.

Truck maker MAN said it expected 2010 profit at around the same level as 2009 and shares rose, trading 3.19 percent higher at 56.37 euros at 1006 GMT (6:06 a.m. EDT), after the group beat forecasts.

Auto parts maker Continental posted a 1.04 billion euro third quarter net loss after a massive writedown, but said it would see a significant year-on-year improvement in the final three months and pledged to shore up its balance sheet while it renegotiates a 3.5 billion euro loan repayment.

Continental shares were up 4.69 percent at 36.25 euros.

(Writing by Helen Massy-Beresford, editing by Marcel Michelson)