Volkswagen AG is planning to follow the product rollout strategy similar to those employed by consumer electronics companies like Apple Inc. – fast and furious. This means that VW has to accelerate vehicle development, and it is already forming a task force that will include 40-60 top managers in the next few months, according to internal documents obtained by Bloomberg News.
The task force will be charged with determining the steps needed to shift from the traditional approach of revamping models every seven years, considering that technology developments like in-car connectivity and electric motors need faster reaction times.
In a speech to managers, VW chief executive Martin Winterkorn said that to shorten today's model cycles and make them significantly more flexible, they need to follow the pace set by consumer electronics companies.
The task force set up by VW is part of the carmaker’s bid to trim costs and improve productivity at its namesake brand by EUR5 billion ($6.8 billion) annually. VW wants to gain savings by reducing purchasing expenses, lessening complexity and cutting factory costs.
The carmaker – boasting of nearly 575,000-strong global workforce – has sought to offset its high wage bill by sharing common parts as well as development costs among its brands.
No thanks to stiff competition in Europe and the high costs needed to introduced fresh models like revamped Passat, the brand saw its profit margin fall to just 1.8 percent of sales in the first quarter of 2014, compared to 2.4 percent in the same period in 2013.
VW is aiming to squeeze a 6-percent profit margin at its namesake brand. Winterkorn has turned his eyes on profitability as he expects the group to exceed 10 million vehicles in sales in 2014, four years earlier than initially planned. [source: Bloomberg]