Works council chief says VW could still get cost savings of more than $5.7 billion

Article by Christian A., on February 2, 2015

Volkswagen could still wring out more savings its passenger-car brand by "substantially more" than the EUR5 billion ($5.7 billion) planned, according to works council chief and supervisory board member Bernd Osterloh. He said that the carmaker’s product-development processes can still become more efficient to get more savings.

These extra savings could come from moves like intensifying a cutback in the variety of vehicle components. Osterloh said that in 2014, the carmaker’s VW assembly workers have submitted over 500 ideas to improve efficiency. VW’s sales operation also came up another 800 suggestions.

Chief Financial Officer Hans Dieter Poetsch has said in January that cutting the range of parts in vehicles like the Golf and Polo hatchbacks will offer "significant savings potential." Restoring profitability at the VW passenger-car brand is part of a bid to become more cost competitive and better offset volatile car markets.

This bid has included limiting spending increases and hiking revenue, while spending EUR17 billion annually through 2019 on new vehicles, technology and factory expansion. Chief executive Martin Winterkorn has shifted VW’s focus from sales growth to boosting earnings.

He wanted the VW nameplate to boost its profits by EUR5 billion by 2017, including boosting the operating profit margin to at least 6 percent of revenue by 2018. Osterloh noted that the weak Russian ruble and the dropping demand for vehicles are affecting VW earnings by "a three-digit million-euro" sum.

He also struck down a recent report by Manager Magazin saying that VW's new holding company for its heavy-truck business will be based in Frankfurt.

According to Osterloh, it would make "no sense" for the unit to be operating in a location that has no link to other divisions of VW group. The group is targeting to surpass Toyota Motor Corp. as the largest carmaker in the world by 2018.

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