FRANKFURT -- Volkswagen's supervisory board met to discuss future investments on Friday, and analysts say the outcome will provide crucial evidence of management's commitment to sustainable profit growth.
The meeting comes against the backdrop of an ambitious three-year restructuring program, "ForMotion Plus", that begins in 2006 and could lay the groundwork for VW to reach its goal of improving pretax profit by 4 billion euros ($4.7 billion) to 5.1 billion euros by the end of 2008.
The so-called "Planning Round 54" is expected to incorporate plans for gross earnings to rise by 10 billion euros over the three-year timeframe, including 7 billion euros at the VW brand to be achieved mostly through cost cuts.
Europe's biggest carmaker has already said it seeks to expand the use of components and modules across the entire group, reduce complexity, improve relations with suppliers, diversify purchasing more globally and review its engineering and logistics.
Last year, the board approved investments in 2005 and 2006 that would total 16.3 billion euros, letting its capital spending ratio fall below 7 percent of sales for those two years.
The company said at the time investments in fixed assets at its core Automotive division would drop 6 percent to 11.8 billion euros compared with the previous planning round.
In addition, the carmaker said investments at its two non-consolidated joint ventures in China would decline by 22 percent from the previous planning round to 2.1 billion euros over 2005 and 2006.
NEW PERSONNEL CHIEF
Volkswagen's board, chaired by ex-Chief Executive Ferdinand Piech, will also get a report from KPMG over the results of its external audit into VW's books after the company uncovered evidence that corporate funds were misused.
Volkswagen CEO Bernd Pischetsrieder, along with the board, will make a brief statement on KPMG's findings to the media once the meeting is over.
A spokesman for the public prosecutor in Brunswick, which is conducting a criminal investigation into the matter, played down the significance of the KPMG report for its probe.
"I do not expect it to lay the groundwork either for the continuation of the investigation or for the status of the accused," he said, due to KPMG's relatively limited access to information. "It's just one building block among many that will help to uncover the truth of the matter," the spokesman added.
Separately, Volkswagen said it had tapped the human resources chief at its premium unit, Audi, to take over as head of group personnel as of Dec. 1.
Horst Neumann, whose name had repeatedly surfaced in the media as a favored candidate, will replace Peter Hartz, who is well known as the architect of Germany's labor market reforms.
Hartz tendered his resignation in July after senior staff in his department were accused of misusing company funds.
Pischetsrieder has served as interim head of personnel since Hartz's resignation took effect on Aug. 5.