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Coverage: VW to make bigger push into electric cars

December 1, 2017

Posted by Chris Roush

Source: Forbes
Source: Forbes

Volkswagen pledged to speed up its turnaround efforts and accelerate a push into electric cars as cost cuts and an expanding lineup of sport-utility vehicles help boost profits.

Christoph Rauwald of Bloomberg News had the story:

The namesake VW brand will initially develop five all-electric models, taking on Tesla Inc. with its coming I.D. vehicle range, it said Thursday at a press conference at its headquarters in Wolfsburg. The push will be aided by rising profit margins, which are now targeted to reach between 4 percent and 5 percent of sales in 2020, up from a previous estimate of at least 4 percent.

“We will further accelerate the realignment of Volkswagen, continue the worldwide model and electric offensive and work hard on costs,” VW brand chief Herbert Diess said in the statement. “We know which challenges still lie ahead of us.”

Reviving profit at the core VW marque is vital for the world’s largest automaker to stem the fallout from the diesel-emissions scandal and gather the financial firepower to tackle a seismic industry shift toward battery-powered vehicles and new digital services. The brand accounts for more than half of Volkswagen group’s global deliveries and develops key technology for sister nameplates including Audi, Skoda and Seat.

Patrick McGee of The Financial Times reported that VW has cut jobs, but plans to add new ones:

Mr Diess was speaking one year after the VW brand agreed a “future pact” with its unions that would see a reduction in headcount of up to 30,000 people, including 23,000 in Germany, in an effort to save €3.7bn by 2020.

VW said on Thursday it has already cut costs by €1.9bn, by cutting 3,800 jobs to date. Headcount has only fallen by 1,800, however, as it expects to recruit 2,000 apprentices once their training is complete.

By 2020, VW hopes to create 9,000 new jobs in “future-oriented areas” such as digitalisation and electric mobility.

The raised margin target results reflect the overhauling efforts of Mr Diess, a former BMW executive with a reputation for implementing tough cost-cutting measures. He joined VW in July 2015 — just months before the diesel emissions scandal was revealed by the US Environmental Protection Agency, bringing chaos to the company and a major shake-up in management of the group.

David Reid and Annette Weisbach of CNBC.com reported that the company also raised its margin target:

Volkswagen said Thursday that its namesake brand will exceed its 2017 margin target of 2.5 to 3.5 percent. This result is remarkable, considering the hugely disruptive diesel scandal in 2015.

The 2020 margin target for the Volkswagen brand has now been lifted to sit between 4 and 5 percent.

The VW brand, which makes up about half of sales for the 12-brand Volkswagen Group, has also recorded strong sales across 2017.

VW’s Brand CEO Herbert Diess said Thursday that a new SUV launch in the U.S., a recovery in Latin America and reduced costs in Europe were helping the firm.

 

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