Volkswagen is looking beyond the slump in Europe and is actually planning to increase its investments in new vehicles and plants in order to achieve its long-term objective of being the No. 1 automaker in the world. Volkswagen, a group composed of numerous brands, is not as exposed to the struggling European auto market compared to rivals PSA/Peugeot-Citroen and Fiat.
Nevertheless, getting the funds to attain its target has become more difficult and so it has to balance its need to create new products and to control its short-term costs. It’s believed that VW's 20-member supervisory board will sign off on new spending targets for 2013-17 on Friday.
Analysts said that the company is predicted to raise spending by 12% to up to 70 billion euros ($89.73 billion) for its 12 brands over the next five years, compared with the previous year’s agreed estimate of 62.4 billion for the 2012-16 period. While this stands for a record figure, it also represents a slowdown. The spending target was increased by 20.9% to 62.4 billion euros from 51.6 billion euros for the 2011-15 period.
When interviewed by Reuters, Peter Mosch, top labor leader of VW's Audi division and a member of VW's supervisory board, said that it is now under more pressure to reduce costs due to the economic state but it will have to cope with spending to achieve its expansion goals.
VW will need to increase investments on products and technology so that it could consolidate its lead over suffering rivals PSA and Fiat, which have delayed or dropped entire vehicle programs, engine technologies and platform revamps while dealing with the high fixed costs in a declining European market.
The high sales that VW experienced in other markets have enabled it to offer cut-price deals and widen its share of the European market to nearly a quarter.