FRANKFURT (Bloomberg) -- Volkswagen Group will spend 50.2 billion euros ($64.3 billion) in its automotive division over the next three years, shortening its investment calendar from the usual five years as market uncertainty in Europe makes long-term planning more difficult.The supervisory board today approved the funding for plants, vehicles and r&d through 2015, the Wolfsburg-based company said in a statement.
VW's Chinese joint ventures, which are not consolidated, will invest another 9.8 billion euros during that time period."There are a number of uncertainties globally," said Juergen Pieper, a Frankfurt-based Bankhaus Metzler analyst. "They may want a certain degree of flexibility, more than in the past, because there is room for quite dramatic changes in the market conditions."VW, which has added Porsche sports cars and Ducati motorcycles to build a stable of 12 brands, has offset its 0.6 percent 10-month decline in European deliveries with 20 percent growth in China.
|Volkswagen Passat||Volkswagen Siroco|
The European auto market is headed for a 17-year low in 2012, according to the auto industry group ACEA, which estimates 30 percent of the region's production capacity is unused.While usually laying out five-year plans, the crisis that hit the European car market in 2009 also prompted VW to plan a three-year investment timetable as forecasting became more difficult
"Despite the challenging economic environment, we are investing more than ever before to reach our long-term goals," VW Group CEO Martin Winterkorn said in the statement today.
VW in China is building plants in Ningbo and Yizheng with its joint venture partner SAIC Motor Corp., adding to factories already operating in Nanjing and Shanghai.It also has production facilities run jointly with China's FAW Group Corp. in Changchun and Chengdu, while building another in Foshan and an assembly plant in Xinjiang.
China is VW's biggest market.Volkswagen's global sales ranked behind General Motors and Toyota in the first nine months. The German automaker aims to overtake the two companies by 2018
BERLIN (Reuters) -- Volkswagen is expected to increase planned investment in new vehicles and factories as it looks beyond a European slump to its long-term goal of being the world's largest carmaker. VW's 20-member supervisory board is due to sign off on new spending targets for 2013-2017 on Friday.
While the multibrand group is less exposed to austerity-hit Europe than rivals PSA/Peugeot-Citroen and Fiat, finding the cash to achieve its goal is becoming harder and it has to balance keeping a tight rein on short-term costs with the need to develop new products.The company is expected to increase spending by 12 percent to as much as 70 billion euros ($89.73 billion) for its 12 brands over the next five years, compared with 62.4 billion for the 2012-2016 period agreed a year ago, analysts said.
That would be a record level, but also represent a slowdown -- the spending target was raised 20.9 percent to 62.4 billion euros from 51.6 billion euros for the 2011-2015 period."Pressure to cut costs is definitely higher in such difficult times, but we must keep up spending to meet our expansion goals," Peter Mosch, top labor leader of VW's Audi division and a member of VW's supervisory board, told Reuters.
By stepping up investments on products and technology, VW could consolidate its lead over stricken peers PSA and Fiat, which have slowed or shelved whole vehicle programs, engine technologies and platform revamps while grappling with high fixed costs in a shrinking European market.VW's strong sales elsewhere have allowed it to offer low-price deals and swell its share of the battered European market to almost a quarter.VW spokesman Marco Dalan declined to comment on the company's new spending plans
Passing GM to be No. 1
As VW strives to replace General Motors Co. as the world's No. 1 automaker no later than 2018, it keeps increasing its presence outside Europe, building or planning new factories in markets such as China, Mexico and Russia.Growing technology needs, foreign expansion and the integration of sports car maker Porsche and truckmaker MAN SE will make for high levels of spending in the years ahead, Metzler Bank analyst Juergen Pieper said.
|Porche Panamera||Porche Cayenne|
But even with net cash of 9.2 billion euros at the end of September and an expectation of matching last year's record operating profit in 2012, VW has to keep a tight rein on costs. It may delay certain projects but it will keep up underlying, strategic investments, LBBW analyst Frank Biller said: "VW will maintain its pretty high pace of spending."
In the short-term, VW is halting production of the Passat model at a German factory in Emden between Dec. 17 and Dec. 21, after shuttering the plant for two days in October as part of a wider move to cut group output by about 300,000 vehicles to 9.4 million cars this year.
Plans by VW's superluxury brands Bentley and Lamborghini to develop SUVs may be put on hold by the German parent to save cash, after VW's third-quarter profit plunged by a fifth, company sources said."One definitely has to fight for investments [with parent VW]," Audi works council boss Mosch said. "It cannot always be like a request show where everyone makes a wish."
In 2011, VW Group sold 8.27 million units globally, behind GM with 9.05 million and ahead of Toyota with 7.95 million.