VW bets on new tech­nol­ogy to bounce back from cri­sis

Jamaica Gleaner - - BUSINESS -

AVOLKSWAGEN’S name­sake brand hopes to bounce back from its diesel-emis­sions scan­dal with a broad re­struc­tur­ing that will mean more bat­tery-pow­ered cars, dig­i­tal ser­vices such as ride-shar­ing, and more SUVs for the United States market.

Her­bert Diess, the head of the Volk­swa­gen di­vi­sion, un­veiled the com­pany’s Trans­form 2025 plan at a news con­fer­ence Tues­day, say­ing that “in the com­ing years, we will fun­da­men­tally change Volk­swa­gen. Only a few things will re­main as they are”.

The plan fore­sees a ma­jor shift in fo­cus to­wards in­vest­ments in elec­tric-car tech­nol­ogy and in soft­ware to en­able new ways of us­ing and shar­ing cars. The Volk­swa­gen di­vi­sion alone ex­pects to sell a mil­lion elec­tric ve­hi­cles a year by 2025. In­clud­ing the com­pany’s other brands, such as SEAT and Skoda, the Volk­swa­gen Group ex­pects to sell up to three mil­lion electrics by then.

Diess said the com­pany would also “mas­sively step up” its ca­pac­ity to de­velop soft­ware, aim­ing to cre­ate in­dus­trylead­ing pro­grams and hard­ware sys­tems for dig­i­tally con­nected and au­ton­o­mous cars by 2025.

An­other el­e­ment of the plan is in­creas­ing sales in the US by in­tro­duc­ing prod­ucts that are more ap­pro­pri­ate for the market, such as more SUVs and larger cars. This year, Volk­swa­gen­badged cars have only 1.8 per cent of the US market through Oc­to­ber, badly lag­ging be­hind com­peti­tors such as Gen­eral Mo­tors, Ford, Fiat Chrysler and Toy­ota.

MAR­KETS AND MAR­GINS

Diess also said the com­pany would start mak­ing elec­tric ve­hi­cles in the US by 2021. Cur­rently, Volk­swa­gen makes Pas­sat sedans at its plant in Chattanooga, Ten­nessee.

“For years, a con­cept for suc­cess in the US has been lack­ing,” Diess said at the com­pany head­quar­ters in Wolfs­burg, Ger­many. “Some­times we have not been on the band­wagon with new market trends.”

He said re­gional man­agers would get “more lo­cal re­spon­si­bil­ity” to make de­ci­sions and meet lo­cal con­di­tions.

The plan for the Volk­swa­gen brand fol­lows Friday’s an­nounce­ment that the di­vi­sion would elim­i­nate 30,000 jobs, of which 23,000 are in Ger­many, and cre­ate 9,000 new po­si­tions fo­cused on new tech­nolo­gies.

Diess said the com­pany aims to raise profit mar­gins on sales to six per cent by 2025, from just two per cent in 2015. Profitabil­ity at the Volk­swa­gen brand has lagged due to its higher cost base, the re­sult of a strong role for em­ployee rep­re­sen­ta­tives. They have half the board seats, and are generally sup­ported by the govern­ment of Lower Sax­ony, which holds a stake in the com­pany. Partly as a re­sult, Volk­swa­gen Group makes most of its prof­its from its lux­ury brands Audi and Porsche.

The com­pany struck a deal with its work­force, which agreed to the job re­duc­tions through vol­un­tary means, such as early re­tire­ment over a pe­riod of years. In re­turn, em­ploy­ees won a com­mit­ment to lo­cate new tech­nol­ogy devel­op­ment and man­u­fac­tur­ing in Ger­many.

Volk­swa­gen has agreed to pay US$15 bil­lion un­der a set­tle­ment with US au­thor­i­ties and car own­ers over cars equipped with soft­ware that turned off emis­sions con­trols un­der nor­mal driv­ing con­di­tions. The scan­dal has served as a spur for the com­pany to shake up its man­age­ment cul­ture and ad­dress long-stand­ing is­sues such as the cost ques­tion in Ger­many.

Elec­tric cars re­main only a small frac­tion of the global market. Yet, ma­jor au­tomak­ers are in­vest­ing heav­ily in bat­tery­pow­ered ve­hi­cles as they po­si­tion them­selves for a time when in­creas­ing range and fall­ing costs tip the bal­ance and make con­sumers more in­ter­ested. Along with elec­tric ve­hi­cles, au­tomak­ers are work­ing on ve­hi­cles that take over more and more func­tions from the driv­ers, and on new ways of us­ing and own­ing cars, such as app-based rideshar­ing and car-shar­ing.

The head of Volk­swa­gen core brand Her­bert Diess speaks at a news con­fer­ence at the Volk­swa­gen head­quar­ters in Wolfs­burg, north­ern Ger­many, on Tues­day, November 22.

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