VW feels pinch from raw materials

Volkswagen is stepping up efforts to cut costs in the face of rising raw materials prices but still expects to feel the pinch, Europe's biggest carmaker said today.

"From today's perspective the impact resulting from (cost-cutting) will not compensate for current market prices," a spokesman said.

VW's comments came amid a sell-off in European car sector stocks given renewed concerns over raw material prices, ongoing worries over the outlook for the U.S. economy, and the euro's strength against the dollar.

Volkswagen and other carmakers typically lock in steel prices via long-term contracts but face price increases as these contracts have to be renewed.

BMW, the world's biggest premium carmaker, reiterated that it expected the burden from higher materials costs to rise 12 percent this year versus 288 million euros ($448 million) in 2007 and 178 million the year before.

Shares in Daimler retreated on market talk -- which the company denied -- that it was lowering its 2008 guidance for higher operating profit from ongoing operations.

Daimler stock was down 4.9 percent at 12:47 CET, while Volkswagen shed 2.1 percent and BMW fell 3.7 percent.