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Volkswagen Investing in Biggest Automaker Goal

German maker putting up nearly 86 billion Euros on plans.

by on Nov.24, 2014

VW CEO Martin Winterkorn said the company plans to invest nearly 86 billion Euros during the next five years into the automotive division.

The Volkswagen Group, with its sights set on becoming the world’s largest automaker by volume, has announced an ambitious invest five-year investment plan that competitors will be hard pressed to match

The VW Group plans to invest a total of 85.6 billion Euros on new models, innovative technologies and its global presence in its automotive division during the next five years, VW Chief Executive Officer Martin Winterkorn said. In addition, the VW Group’s Chinese joint ventures will invest an additional 22 billion Euros.

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Winterkorn said two-thirds of the total investment amount will flow into increasingly efficient vehicles, drives and more environmentally friendly production. This is the result of the group’s investment planning for 2015 to 2019 discussed by the VW Board Supervisory Board.

“We will continue to invest in the future to become the leading automotive group in both ecological and economic terms – with the best and most sustainable products,” Winterkorn said in a statement.

“Development costs will remain high in the future as a result of high innovation pressure and increasing demands on the automotive industry from (carbon dioxide) legislation. As a group, we have the expertise and financial strength to continue to extend our technology leadership and to reach our goals for 2018.”

Winterkorn said that capital investment in the automotive division will remain at the same level over the entire planning period – despite increasing demands and the additional growth planned by the automaker.

In addition to spending on capital investment, the plans also include capitalized development costs of 21.9 billion euros and proceeds from asset disposals of $600 million euros, net of investments in financial assets. The development costs include upfront investments in connection with complying with environmental requirements and in expanding and upgrading the model portfolio.

More than half of the capital investment will be in Germany.

“This investment program once again clearly demonstrates our commitment to our domestic plants and employees. Our 28 German locations are the backbone of the group – our outstandingly qualified team and highly efficient production here are a key competitive advantage, and one we intend to maintain,” said Winterkorn.

“At the same time, we are also strengthening and expanding our international presence to systematically leverage market opportunities all over the world.”

(Volkswagen Golf gets new HyMotion fuel-cell drive option. For more, Click Here.)

“The planned investment amount shows that Volkswagen is continuing to invest substantially in its global locations – and consequently in the almost 600,000 jobs around the world. At the same time, this planning round again clearly demonstrates Volkswagen’s commitment to Germany as a business location, which certainly distinguishes the Company from other competitors,” said Bernd Osterloh, chairman of Volkswagen’s Group Works Council.

Winterkorn said VW’s main focus will be on expanding the SUV range – in particular in the A/A0 class – as well as on modernizing part of the light commercial vehicle portfolio.

(Click Here for details about GM’s $1 billion investment plans.)

At the same time, investments are also planned in new vehicles and successor models in almost all vehicle classes, which will be based on the modular toolkit technology and related components. This will allow the Volkswagen Group to systematically continue its model rollout with a view to tapping new markets and segments, he said.

In the area of powertrain production, new generations of engines will be launched offering additional enhancements to performance, fuel consumption and emission levels. The Group will also continue to press ahead with the development of hybrid and electric drives.

In addition, the company will make cross-product investments of 23 billion euros over the next five years.

(To see more about a possible Tesla-BMW collaboration, Click Here.)

The investments include spending to expand capacity, a new Crafter plant in Poland and the new Audi plant in Mexico. Other investment focuses are press shops and paint shops, reflecting the Company’s high quality targets and the continuous improvement of its production processes.

The joint ventures in China are not consolidated and are therefore not included in the above figures. They will invest a total of 22 billion euros in new production facilities and products in the period from 2015 to 2019. These investments will be financed from the joint ventures’ own funds.

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2 Responses to “Volkswagen Investing in Biggest Automaker Goal”

  1. Jorge says:

    What VW is stating is pretty standard fare for any major auto company so I guess what they really mean is they are going to accelerate their development, ramp production hoping that they can actually sell the excess vehicles they produce (like U.S. companies do), and of course develop more hybrids, EVs and perhaps related supporting structures. This should help reduce unemployment a bit.

    I wonder if VW Ag understands that the reason why they are not very successful in the U.S. is due to production quality issues, replacement parts price gouging, horrible dealership experiences and the overall ownership experience being unacceptable? This isn’t just my opinion, it’s backed up by VW customer surveys and feedback in many automotive forums. The management at VW Ag don’t seem to ever hear or read these comments it would appear.

  2. Mike Nassour says:

    NAILED it, Jorge! The obscene cost of VW parts and service, combined with poor reliability is hurting the brand. I know of no fewer than THREE current model Passat owners who say they will NEVER set foot in a VW dealership again for a new car, mainly due to issues with the US-built Passat.