Volkswagen To Invest $50.2 Billion In Automotive Division

Friday, November 23, 2012
The Volkswagen Group will invest $50.2 billion in its Automotive Division in the coming three years. This is the result of the Group’s investment planning for 2013 to 2015 discussed by the Supervisory Board of Volkswagen Aktiengesellschaft at its meeting on Friday. For the first time, the planning also includes the newly consolidated MAN and Porsche brands. “Despite the challenging economic environment, we are investing more than ever before to reach our long-term goals”, said Prof. Dr. Martin Winterkorn, Chairman of Volkswagen Aktiengesellschaft’s Board of Management in Wolfsburg. “This investment is the key to the Volkswagen Group’s innovation and technology leadership. It enables us to further strengthen our competitive position and ensure that we are fit for the future.”

Investments in property, plant and equipment will account for $39.2 billion. More than half of this figure (60 percent) will be invested in Germany. “In this way, we are laying the foundations to ensure that our 27 German production facilities remain at the forefront of innovation and international competitiveness”, said Winterkorn, reiterating that: “At Volkswagen, we are committed to Germany as an industrial location.” The ratio of investments in property, plant and equipment (capex) to sales revenue will be at a competitive level of between six and seven percent in the period from 2013 to 2015.

Alongside investments in property, plant and equipment, the plans also include capitalized development costs of $10.6 billion. By building new production facilities, introducing new models and developing alternative drives, as well as with its modular toolkits, Volkswagen is laying the foundations for profitable, sustainable growth, officials said.

According to Group Works Council Chairman Bernd Osterloh, “Continued high levels of investment strengthen the Group’s ability to face the challenges of the future – both in terms of products and production processes. The investment planning agreed upon also represents a clear commitment to securing jobs and employment at Volkswagen, particularly in light of the difficult conditions seen in the automotive industry.” Mr. Osterloh said that sustainability and new technologies such as hybrid technology are likewise a clear emphasis in the investment planning. “We are also investing in securing our proven flexible production network between plants. This enables flexible production of different volumes and products at our locations to meet market requirements”, added Osterloh.

At €24.7 billion (roughly 63 percent), the Group will spend a large proportion of the total amount to be invested in property, plant and equipment in the Automotive Division on modernizing and extending the product range for all its brands. The main focus will be on new vehicles, derivatives and successor models in almost all vehicle classes, which will be based on the modular toolkit technology and related components. This includes a new generation of MAN trucks. This will allow the Volkswagen Group to systematically continue its model rollout with a view to tapping new markets and segments. In the area of powertrain production, new generations of engines will be launched offering additional enhancements to performance, fuel consumption and emission levels. In particular, the Group will continue to press ahead with the development of hybrid and electric motors.

In addition, the Company will make cross-product investments of €14.5 billion over the next three years. This includes investments to expand capacity, such as a new vehicle production facility for Audi in Mexico, the expansion of Porsche’s Leipzig plant with the new Macan model in the SUV segment, as well as increased production of automatic gearboxes. Other investment focuses include changes to the press shops, paintshops and assembly facilities as a result of the Company’s high quality targets and the continuous improvement of its production processes. Investments outside production are mainly planned for the areas of development, quality assurance, sales, genuine parts supply and information technology.

Over two-thirds of the $50.2 billion investment program will continue to flow into increasingly efficient vehicles, drives and technologies, as well as environmentally friendly production in the period up to 2015.

The joint ventures in China are not consolidated and are therefore not included in the above figures. These companies will invest a total of €9.8 billion in new production facilities and products in the period from 2013 to 2015. These initiatives will be financed from the joint ventures’ own funds.

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