VW brand plans ‘massive reduction’ in model complexity, engine variants

X Scalper

UPDATED: 12/6/18 7:38 am ET – adds details

WOLFSBURG — Volkswagen Group’s core brand aims to raise its profit margin faster than previously planned despite rising investments for electric vehicles, the automaker said on Thursday.

The Volkswagen brand now aims to raise its profit margin to at least 6 percent in 2022, three years earlier than initially forecast. Most recently, the margin stood at 4 percent. VW had previously said it seeks to achieve an operating return on sales of at least 6 percent by 2025.

VW brand aims to invest more than 11 billion euros ($12.5 billion) in e-mobility, digitalization, autonomous driving and mobility services by 2023, with the bulk earmarked for the electrification of its cars, the automaker said.

To shoulder the investments, VW aims for bigger cost cuts than previously planned, with the productivity of its plants to rise by about 30 percent by 2025. The automaker will extend a cost savings and efficiency program at its core brand beyond 2020 and seek an additional 3 billion euros in cost savings by 2023.

The group did not reveal details about whether jobs would be affected but has ruled out forced layoffs.

There will be a “massive reduction” in the complexity of the model portfolio, it said. In Europe, the brand will be discontinuing 25 percent of the engine-transmission variants with low customer demand in the coming model year. This will have positive effects on the complexity of production and the supply chain, VW said.

Entry level motorizations will only come with manual transmission in future and will no longer offer the option for an automatic transmission or all-wheel drive, VW brand Chief Operating Officer Ralf Brandstaetter said.



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