VW STRATEGY TO BUMP PROFITS
Move to fund electric cars
WOLFSBURG – Volkswagen (VW) will invest more than ß10-billion (about R173-billion) by 2025 in areas such as electric cars and ridehailing as it seeks to reshape its business in the wake of its emissions test cheating scandal, it said yesterday.
Europe’s biggest carmaker said it would fund what it dubbed “the biggest change process in the company’s history” with an efficiency drive, including integrating components businesses that currently employ 67 000 people in 26 locations worldwide.
“The Volkswagen Group will be more focused, efficient, innovative, customerdriven and sustainable – and systematically geared to generating profitable growth,” chief executive officer Matthias Mueller said, launching a plan called “Together – Strategy 2025”.
VW is battling to recover from the biggest business crisis in its 79-year history after admitting in September 2015 to cheating US diesel emissions tests.
The German company has set aside $18-billion (about R279-billion) to cover the cost of vehicle refits and a settlement with US authorities, and analysts expect more fines and legal costs.
The scandal has cast a shadow over the entire market for diesel cars, which account for about half of new vehicle sales in Europe, and has ramped up pressure on VW to cut costs at its namesake brand, which lags the profitability of rivals.
Spelling out a new strategy ahead of its annual shareholder meeting on Wednesday, the company said it planned to launch more than 30 electric vehicles over the next 10 years, forecasting they would account for two to three million unit sales in 2025, compared with a tiny number currently.
It also said it would build a services business encompassing areas such as ridehailing and car-sharing that it expects to generate sales in the billions of euros by 2025, as well as developing its own autonomous driving and battery technologies.
Mueller said the transformation would require a “double-digit billion” amount of investment, funded by an efficiency drive across the group aimed at delivering around ß8-billion (about R138-billion) a year in savings.
He gave few details, saying they would be announced by the company’s individual brands in due course, but said the VW brand was counting on a “pact for the future” with unions, aimed at both boosting competitiveness and preserving jobs.
Critics of the company have urged it to take more radical action to cut costs despite union protests, particularly at the VW brand.
Investors are braced too for the results of an ongoing investigation into who was responsible for, and who knew about, the emissions test cheating.
However, Evercore ISI analyst Arndt Ellinghorst said yesterday the new strategy was an encouraging sign.
VW said its new plan aimed to improve its operating return on sales before one-off items to seven to eight percent by 2025 from 6% in 2015, and the return on capital employed in its automotive division to more than 15% from 13.8%.
Mueller reaffirmed the company’s expansion and investment plans for North America and China, adding he expected China would be the main market for its new electric cars. –