Volkswagen to invest 62.4 billion euros within five years to become No. 1

Article by Christian A., on September 16, 2011

Volkswagen Group is planning to inject around €62.4 billion into its Automotive Division in the next five years (2012-2016), following an investment planning discussion by Supervisory Board on Friday. Volkswagen AG chief executive Martin Winterkorn quipped that the group is investing in forward-looking projects as part of its efforts to become the best carmaker in the world in both economic and ecological terms.

He added that the investment – particularly into environmentally friendly, sustainable models and drives -- will allow them to extend its innovation and technology leadership. Around €49.8 billion will be invested into property, plant and equipment, 57 percent of which will be implemented in Germany. Winterkorn added that the high level of investments into Germany could be the best possible proof of the country’s international competitiveness as a leading manufacturing site.

During the five-year period, ratio of capital expenditure to sales revenue will be around six percent on average. Around €11.6 billion will be used to cover capitalized development costs and €1.0 billion will be invested into financial assets, net of proceeds from asset disposals.

These investments into new production facilities, new models, alternative drives and modular toolkits should allow the VW Group to lay the foundation and achieve profitable and sustainable growth. Bernd Osterloh, Group Works Council Chairman, quipped that the investments – in the form of innovative products, manufacturing processes and global locations -- signify a move that would ensure that the Group remains fit for the future.

He added that such investment safeguards jobs for the long term. Osterloh added that the board’s planning discussion is proof of VW’s commitment to Germany. He noted that around €100 million will be used in improving the flexibility in the body and white production area at the carmaker’s Wolfsburg facility as well as at its Emden’s plant.

He remarked that the investments into the Wolfsburg and Emden locations would guarantee operations at the Emden-Wolfsburg-Zwickau turntable. Osterloh said that it should be possible to manufacture different volumes of different products in these locations in the future. Investments in these locations will concentrate on products like new diesel and petrol engines, alternative drives, and new direct shift gearboxes.

Press Release

Volkswagen Group to invest more than €62 billion up to 2016

The Volkswagen Group will invest around €62.4 billion in its Automotive Division in the coming five years. This is the result of the Group's investment planning for 2012 to 2016 discussed by the Supervisory Board on Friday. "The Volkswagen Group is investing a record amount in forward-looking projects to achieve its goal of becoming the world's best automobile manufacturer in economic and ecological terms", said Prof. Dr. Martin Winterkorn, CEO of Volkswagen Aktiengesellschaft, adding: "We shall continue to extend our innovation and technology leadership. Top of the agenda for us are investments in environmentally friendly, sustainable models and drives."

Investments in property, plant and equipment will account for €49.8 billion. More than half of this (57 percent) will be invested in Germany alone. According to Winterkorn, the Volkswagen Group with its high level of domestic investments offers the best possible proof of Germany's international competitiveness as a leading manufacturing location. "And this will continue to be the case in future", he said.

The ratio of capital expenditure to sales revenue will be at a competitive level of around six percent on average in the period from 2012 to 2016.

Besides investments in property, plant and equipment, the total amount also includes additions to capitalized development costs of €11.6 billion and investments in financial assets of €1.0 billion net of proceeds from asset disposals. Volkswagen is laying the foundations for profitable, sustainable growth by building new production facilities, introducing new models and developing alternative drives, as well as with its modular toolkits.

Group Works Council Chairman Bernd Osterloh commented as follows: "Volkswagen's investment package is yet another move designed to ensure the Group is fit for the future and takes the form of high-quality investments in new, innovative products, manufacturing processes and our global locations. This safeguards jobs for the long term." He also said that the planning round is proof of Volkswagen's commitment to its home country of Germany. For example, roughly €100 million will be invested in significantly improving the flexibility in the body and white production area of the Wolfsburg plant. The same applies to body and white production at Emden. "The investments in the Wolfsburg and Emden locations safeguard operations at the Emden – Wolfsburg – Zwickau turntable. In future, flexible manufacturing of different volumes and products will be possible at these locations, reflecting market requirements. This represents a major contribution to ensuring these three locations are fit for the future", Osterloh said. In addition, the investments in the German locations will focus on alternative drives, new generations of diesel and petrol engines, and new generations of Volkswagen's innovative direct shift gearboxes.

At €32.7 billion (roughly 66 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 and successor models in almost all vehicle classes, which will be based on the modular toolkit technology and related components. 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 engines.

In addition, the Company will make cross-product investments of €17.1 billion over the next five years. Due to the high quality targets and the continuous improvement of production processes, the new products also require changes to, and additional capacity in, the press shops, paintshops and assembly facilities. Investments outside production are mainly planned for the areas of development, quality assurance, sales, genuine parts supply and information technology.

Investment activities will also include expenditure on wind, solar and hydroelectric power, in order to supply the factories with renewable energies.

The plans are based on the Volkswagen Group's current structures and hence already take into account the consolidation of Porsche Holding Salzburg.

The joint ventures in China are not consolidated and are therefore also not included in the above figures. These companies will invest a total of €14.0 billion in new production facilities and products in the period from 2012 to 2016. These investments will be financed using the joint ventures' own funds.

Topics: vw, investment

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