Europe uncertainly forces VW to shorten time period for investment plan
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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. 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.
PSA cuts
PSA/Peugeot-Citroen, Europe's second-biggest carmaker after VW Group, is cutting 8,000 jobs to reduce spending. PSA in the last year has been burning through 200 million euros a month in cash reserves.
The Paris-based company is more dependent on Europe than VW, with the region accounting for 64 percent of its sales in the nine months through September, compared with 42 percent for its German counterpart.
After introducing a new version of its best-selling Golf hatchback in September, VW is planning a further 40 models based on the same framework at brands such as Seat and Skoda in order to cut costs. The shared architecture, known internally as MQB, should cut production costs by 20 percent, manufacturing time by 30 percent and one-time expenses by 20 percent, VW said in August.
VW plans to invest 24.7 billion euros in new models for its brands, which also include premium automaker Audi, the only VW Group marque whose sales have grown in Europe this year, Spanish subsidiary Seat and Czech Republic-based Skoda.
China expansion
"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.
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