VW to focus 65% of spending on product-related projects

Article by Anita Panait, on November 26, 2013

Volkswagen will be investing to upgrade and expand its range of models in the next years, despite cutting planned investment in other areas to offset hiking costs. In a statement, VW said that it will dedicate around 65 percent of overall planned investment of EUR84.2 billion ($113 billion) through 2018 to vehicles and technology.

Investments unrelated to products will fall about half a billion euros per year to EUR12.7 billion between 2013 and 2015, from EUR13 billion in the 2012 three-year program, the carmaker said, citing steps to delay construction projects and streamline capacity.

"In times like these, our disciplined cost and investment management will remain a cornerstone of our activities," VW chief Martin Winterkorn said in the statement.

The carmaker will concentrate mainly on new vehicles and successor models based on its new MQB modular architecture, which according to VW, will allow the group to "systematically continue its model rollout with a view to tapping new markets and segments."

The German carmaker's high level of spending also highlights investments required to develop hybrid and electric motors and to overhaul the group's engine range to comply with the new Euro 6 standard, which requires lower nitrogen oxide emissions from diesel cars sold in Europe after January 1, 2015.

But since the new MQB production platform is weighing down VW's profit and price discounts while currency effects are trimming its sales income, analysts predicted that the carmaker will protect  product-based spending from cuts in non-model projects. The carmaker is trimming capital expenditures by delaying construction projects and improving capacity usage. Investment levels will be equal to 6 percent to 7 percent of annual sales in the period, the carmaker said.

Topics: vw

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