The unit signed a landmark labor agreement a year ago to trim jobs and save 3.7 billion euros in expenses.
VW Group's long-term goal is to lift the brand's operating profit margin to 4 percent by 2020 and 6 percent by 2025 from 1.8 percent past year, still lagging French rivals PSA Group and Renault.
A good thing too as it will need deep pockets to cover the liabilities from the dieselgate scandal.
Following the diesel scandal in 2015, net liquidity in the automotive division fell by just 8.9 percent, to 23.6 billion euros.
"Our efforts to improve efficiency and productivity across all areas of the company are also paying off", chief executive Matthias Mueller said. The Volkswagen brand has struggled with high costs and low profit margins. It's also starting to weed out a convoluted sales structure. "These quarterly results represent the first tangible results - and we will continue to fight for every single customer".
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The increase came despite vehicle sales at the 12-brand group declining, another sign of VW's accelerating cost-savings drive.
Audi's profit was slightly decreased, achieving 1.2 billion euros, over 1.3 billion previous year while Skoda continued its great performance, posting a profit of 415 million, an increase of 31.8 percent. The expansion of the global model and technology portfolio in the period under review also led to higher depreciation and amortization charges. The MAN and Scania commercial vehicle brands also increased profits by 28 million and 80 million euros respectively.
Group sales revenue rose by 10 percent to $61.33 billion, VW said.
On the plus side, Porsche remained strong (€832 million in profit) and both Skoda and Seat have been surging, with Seat's profit jumping 56 per cent to €54 million after years of losses and Skoda's profit climbing 32 per cent to €415 million.
"Challenges will arise particularly from the economic situation, intense competition in the market, exchange rate volatility and the diesel issue", the carmaker said.