VW Group will cut parts variety to save costs and hike profits

Article by Christian A., on January 23, 2015

Volkswagen Group is planning to cut the variety of components on VW-branded vehicles to reduce costs and boost its profitability. Chief Financial Officer Hans Dieter Poetsch said in an online presentation that such move will offer "significant savings potential."

Poetsch said that reducing the number of battery and interior-lamp models in the current Golf by around half will help cut costs. He added that reducing engine and gearbox variants for the next version of the Polo by 30 percent will improve costs.

He confirmed that Volkswagen was able to meet its group target in 2014 – a 3-percent jump in revenues and 5.5 percent to 6.5 percent operating margin. He said that the carmaker is "well on track" to achieve its goals in three years.

The VW brand is aiming to achieve EUR5 billion ($5.8 billion) in earnings by 2017, with operating profit at least 6 percent of revenue by 2018. VW also targets a group-wide pretax profit exceeding 8 percent of revenue.

Volkswagen topped 10 million vehicle sales in 2014, four years earlier than targeted. That allowed VW to remain the second largest carmaker in the world, within a striking distance from Toyota Motor Corp.

Jose Asumendi, an analyst at JPMorgan Chase & Co., said in a report to clients that the cost reduction plan is as a positive step to provide more clarity “behind the path to re-rate the margins."

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