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Volkswagen AG Planning $65 Billion, 3-year Investment in Auto Operations

“The man focus will be on new vehicles,” says maker.

by on Nov.23, 2012

The new Porsche Macan will be one of many new products funded by the new investment program.

Volkswagen will invest $65 billion, or €50.2 billion, over the next three years in its bid to become the world’s best-selling automotive manufacturer.

The spending spree will cover a wide range of investments – including what the maker terms “property, plant and equipment,” but it also emphasizes that “the main focus will be on new vehicles.” The dozen automotive brands operated by Volkswagen AG already market about 250 different models but the German company has already revealed plans to significantly expand that line up with everything from high-mileage Volkswagen sedans to new SUVs for the Porsche and Bentley brands.

The Last Word!

“This investment is the key to the Volkswagen Group’s innovation and technology leadership,” said VWAG Chairman Martin Winterkorn. “It enables us to further strengthen our competitive position and ensure that we are fit for the future.”

The timing of the announcement is significant and for several reasons.  VW officials have laid out an aggressive expansion plan which would almost certainly see the various brands generate annual sales of 10 million vehicles or more before decades end. But VW is facing some stiff competition from the likes of Toyota and General Motors.

Last year, GM surged back into the global sales lead as Toyota struggled with shortages resulting from the Japanese earthquake and tsunami of March 2011. VW jumped to second. But this year, Toyota is on track to regain the lead, VW slipping to third.

VW’s investment plans, meanwhile come even as some competitors are cutting back. But “Despite the challenging economic environment,” which has led to a collapse of the European auto market, Winterkon said “we are investing more than ever before to reach our long-term goals.”

A full 60% of the investment VW plans between 2013 and 2015 will go into Germany, including the 27 production facilities it operates in Europe’s most economically healthy national market. Among the overseas investments, however, will be a new Audi plant in Mexico. And observers anticipate the continued expansion of production capacity at the VW plant in Chattanooga, Tennessee.

According to the maker’s latest announcement, the ratio of investments to sales revenues should run between six and seven percent during the three-year period.

While the vast majority of investment will go to VWAG’s various passenger car operations, the investment program will also benefit the MAN subsidiary which will get a new generation of large trucks.

In all, over two-thirds of the investment program will go to what VW describes as “increasingly efficient vehicles, drives and technologies, as well as environmental friendly production” systems.  After a slow start, the maker has been rapidly expanding its push into electrification, most recently launching a new hybrid version of the Jetta.

As big as the $65 billion figure might seem, it actually understates VWAG’s overall plans as the maker’s joint ventures in China are not includes.  Investment programs there will come to another €9.8 billion, or $12.6 billion, between 2013 and 2015.

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