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Volkswagen Aims for Faster Operating Profit Growth

End-of-year meeting at the brand tower in Wolfsburg: executives explain plans for the future.

What can the Volkswagen 
brand do on its own to invest in the future?

This question was answered by Ralf Brandstätter, who manages the brand’s business operations as Chief Operating Officer, Sales Director Jürgen Stackmann and Chief Financial Officer Arno Antlitz in front of journalists in Wolfsburg. The occasion was the brand’s end-of-year meeting.

The aim is clear: to increase operating profit more quickly than originally planned. “We are confident that we will reach our target of an operating profit of at least six percent by 2022, three years earlier than previously planned,” says Chief Financial Officer Arno Antlitz. By doing so, the brand aims to considerably boost its economic performance. It will also streamline the model portfolio and reduce the number of variants. Meanwhile, it wants to increase productivity in the plants and expand its platform-based model orientation. Optimization of material costs will also help the brand achieve its profit targets. Administrative processes will be further streamlined 
as well.

An outline of the topics:

"The ID. will place the dawn of the era of electromobility and the connectivity of our brand within reach for our customers"

Sales Director Jürgen Stackmann

Investments

From 2019 to 2023, the brand aims to invest more than 11 billion euros in electromobility, digitalization, autonomous driving and mobile services. More than nine billion euros of this will go toward the brand’s electrification drive. Currently, the brand has two fully electric cars in its range. By 2025, it wants to have around 20. The conversion of the Zwickau plant to a fully electric factory is already underway. Additionally, the plants in Emden and Hanover will be converted for the production of electric cars from 2022. Together, these three locations will form the biggest e-production group in Europe. In China, too, two electric plants will be built in Anting and Foshan, which will start production in 2020. In North America, the brand will soon be deciding the location of a new plant for electric vehicles. With the fully electric ID., built in Zwickau, Volkswagen is putting a new generation of vehicles on the road that sets new standards in digitalization and connected driving. “The ID. will place the dawn of the era of electromobility and the connectivity of our brand within reach for our customers. It will represent ‘New Volkswagen’ as the first fully connected and fully electric vehicle,” says Sales Director Jürgen Stackmann.

Ambitious targets: COO Ralf Brandstätter at the annual accounts meeting in the brand tower.

"Our rate of transformation not only has to be higher, it also has to be more efficient and agile. We can’t stop now – we have to press ahead with yet more clear improvements. What we have achieved so far is not enough"

Chief Operating Officer Ralf Brandstätter

Costs

In order to finance its hefty future investments, the brand wants to reduce its costs even more than previously planned. “That’s why we have defined a bundle of measures to boost our economic performance, which ensures the Zukunftspakt (Pact for the Future) will be fully implemented while thematically complementing the pact and setting the course for 2025,” explains Chief Financial Officer Arno Antlitz. The Zukunftspakt will deliver cost savings of around 2.2 billion euros by the end of this year. As a result, the majority of the planned savings of three billion euros by 2020 will already have been achieved. Significant additional savings will be achieved through the large-scale expansion of the platform model. Currently, around 60 percent of conventional models are based on the Modular Transverse Toolkit (MQB). By 2020, this figure will be around 80 percent. An additional leverage point is the planned increase in productivity at the plants by an average of 30 percent by 2025. Meanwhile, the complexity of the model portfolio will be considerably reduced. In Europe, the brand will discontinue around 25 percent of engine-transmission variants from its model program next year since there is currently less demand.

"We are confident that we will reach our target of an operating profit of at least six percent by 2022, three years earlier than previously planned"

Chief Financial Officer Arno Antlitz