Splashing the cash

Volkswagen Group wants to knock Toyota off its perch to claim the mantle as the world’s largest car maker. And to do so they know they’ll have to spend up and spend up big. So they have just announced they’ll be pouring in a massive €51.6 billion (AU$70 billion) over the next five years to help achieve their aim.

Professor Dr Martin Winterkorn, Chairman of the Board of Management of Volkswagen AG said, “The Volkswagen Group will help shape the technological turning point in key areas of the automotive industry and, to do this, will continue investing in environmentally friendly technologies, efficient drives and new models.

“We are systematically pursuing the goals of our Strategy 2018 to further increase our profitability and to make Volkswagen the world’s most future-proof automotive group. The investment program we have now resolved will play a significant role in this.”

Volkswagen’s full statement is available after the break.

Volkswagen Group to Invest €51.6 Billion in the Coming Five Years

• Substantial investment in environmentally friendly technologies and new models
• CEO Winterkorn: “We want to make Volkswagen the world’s most future-proof automotive group.”

22 November 2010 – The Volkswagen Group will invest around €51.6 billion in its Automotive Division in the coming five years. Investments in property, plant and equipment will account for €41.3 billion. More than half of this (57 percent) will be invested in Germany alone. Besides investments in property, plant and equipment, this total amount includes additions to capitalized development costs of €10.3 billion. This is the result of the Group’s investment planning for 2011 to 2015, which the Supervisory Board of Volkswagen Aktiengesellschaft discussed at its meeting on Friday.

“The Volkswagen Group will help shape the technological turning point in key areas of the automotive industry and, to do this, will continue investing in environmentally friendly technologies, efficient drives and new models. We are systematically pursuing the goals of our Strategy 2018 to further increase our profitability and to make Volkswagen the world’s most future-proof automotive group. The investment program we have now resolved will play a significant role in this”, said Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft.

“These investments underline Volkswagen’s goal of becoming the leading automobile manufacturer for its customers, employees and shareholders, because our investments are aimed precisely at these three groups. New, attractive and high-quality models for our customers as well as investments in our locations safeguard our colleagues’ jobs. Our shareholders also profit from this, not least because at Volkswagen we all agree that every investment must pay off”, stressed Bernd Osterloh, Chairman of Volkswagen’s Group Works Council.

At €27.7 billion, the Group will spend most of the total amount to be invested in property, plant and equipment in the Automotive Division on modernizing and extending the product range of all its brands. The main focus will be on new vehicles, successor models and derivatives in almost all vehicle classes based on modular technology. This will allow the Volkswagen Group to systematically continue its model rollout with a view to tapping new markets and segments. In powertrain production, new generations of engines will be launched with enhanced performance, fuel consumption and emission levels.

The Group will continue driving forward the development of hybrid and electric motors in particular.

In addition, Volkswagen will make cross-product investments of €13.6 billion over the next five years. The Group’s demanding quality targets and the continuous improvement in its production processes mean that the new products also require changes to be made in the press shops, paintshops and assembly facilities. The new plant in North America will begin operating in 2011. Beyond production, investments are planned mainly in the areas of development, quality assurance, genuine parts supply and information technology.

The ratio of capital expenditure to sales revenue will be at a competitive level of around 6 percent on average in the period 2011 to 2015.

The joint ventures in China are not consolidated and are therefore not included in the above figures. These companies will invest a total of €10.6 billion in the period 2011 to 2015. This amount will be funded in full from the cash flow generated by the Chinese joint ventures.