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Volkswagen to spend $71 billion to help leapfrog Toyota

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Volkswagen to spend $71 billion to help leapfrog Toyota

Paul McVeigh November 19, 2010 11:11 CET

UPDATED: Nov. 19 13:20 CET

Volkswagen AG said it will invest about 51.6 billion euros (nearly $71 billion) in its automotive division in the next five years as it aims to pass Toyota Motor Corp. as the No. 1 global automaker in sales and profitability by 2018.

“These investments underline Volkswagen's goal of becoming the leading automobile manufacturer for its customers, employees and shareholders," VW CEO Martin Winterkorn said in a statement after the automaker's supervisory board today approved investment plans for 2011 to 2015.

"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," Winterkorn added.

About 27.7 billion euros will be invested in modernizing and extending the product range of all the group's brands, which include Audi, Bentley, Porsche and Lamborghini on the luxury side and the VW, Skoda and Seat volume brands.

The main focus will be on new vehicles, successor models and derivatives in almost all vehicle classes based on the company's new modular architecture, VW said.

"This will allow the Volkswagen Group to systematically continue its model rollout with a view to tapping new markets and segments," the company said.

VW said it will continue developing hybrid and electric motors and invest in new generations of engines with enhanced performance, fuel consumption and emission levels.

There will also be cross-product investments of 13.6 billion euros over the next five years. Another 10.3 billion euros will be spent on additions to capitalized investment costs.

Quality improvements

Quality targets and production process improvements mean that the new products also require changes to be made in the company's press shops, paint shops and assembly facilities, VW said.

The ratio of capital expenditure to sales revenue will be about 6 percent on average in the period 2011 to 2015, VW said.

This year, VW announced plans to add two more Chinese factories, bringing the total in the world's biggest auto market to 11 as part of a 6 billion euro investment to double production there to 3 million cars within four years.

VW will also open a plant in Chattanooga, Tennessee, next year to supply the U.S. market and is expanding capacity in Russia.

VW's joint ventures in China are not included in the investments announced today as China operations are not consolidated into VW's results. The China joint ventures with FAW and SAIC will invest 10.6 billion euros from 2011 to 2015, funded by cash generated by the ventures.

10 million sales targeted

VW is targeting a second consecutive year of record deliveries as it adds about 70 models, including Audi's new A1 subcompact and successors to VW's Touareg SUV and the Sharan family van.

VW is aiming to sell more than 8 million cars by 2012 and 10 million as early as 2015, three years earlier than its official target of 2018, a person with knowledge of the matter said last month.

“They're taking the necessary steps in lucrative markets like China, India and the U.S.,” said Joerg Bode, one of the two VW supervisory board members who represent the German state of Lower Saxony, which owns 20 percent of carmaker and has veto rights. “They've committed themselves to ambitious targets under Strategy 2018."

At the end of September, Volkswagen reported net liquidity of 19.6 billion euros.

Toyota budgeted 670 billion yen ($8 billion) for plant and equipment spending in its fiscal year ending March 2011 and 760 billion yen for research and development. Toyota doesn't disclose any mid-term spending plan.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101119/ANE/101119780/1317#ixzz15k9nSJWs

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Volkswagen Investing $70.5 Billion, New Technology Should Ensue

By Viknesh Vijayenthiran


November 22nd, 2010

While some automakers are still reeling from the affects of the recent global financial crisis, and others resorting to drastic measures to raise needed capital, the juggernaut that is the Volkswagen Group seems to only be going from strength to strength. The company has announced today that it plans to invest a whopping $70.5 billion over the next five years in order to make it the world’s most future-proof automotive group.

The bulk of the money will be spent on property, plant and equipment, with the main focus centering around brand new vehicles, successor models and derivatives in almost all vehicle classes based on modular technology. Volkswagen claims that this should help with new vehicle development, with the end goal being to tap new markets and segments.

In powertrain production, new generations of engines will be launched with enhanced performance, fuel consumption and emission levels. The company has highlighted that it will continue driving forward the development of hybrid and electric powertrains in particular.

But it’s not just about new models and technologies. Volkswagen also plans to invest in improvements to its manufacturing facilities to help meet tough new quality targets, all of which should result in better quality and more reliable cars.

Not surprisingly, more than half--57 percent--of this investment will be spent in Germany, Volkswagen’s home market. However, a new plant is also being built in North America and you can bet there will be significant further investment spent here too.



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What's it cost to beat Toyota? $71 billion, says VW

by Chris Shunk (RSS feed) on Nov 22nd 2010 at 8:28AM

For all the trouble Toyota has endured over the past year, the Japanese juggernaut is still the top dog in the automotive kingdom. Volkswagen wants to change that with an ambitious goal to overtake Toyota in overall sales and profitability by 2018. VW currently has a long way to go to reach Toyota, but Automotive News reports that the German automaker plans to bridge the gap by investing 51.6 billion euros ($71 billion in U.S. dollars) though 2015 to beef up it's product lineup.

That's a lot of coin by any stretch, and VW plans to spend that wealth in several key areas. A reported $38 billion will be spent to bolster the automaker's current model lineup across VW's many brands, enabling VW to "systematically continue its model roll out with a view to tapping new markets and segments." Another $19.6 billion will be spent on cross-product investments and another $14 billion will go towards what AN calls "additions to capitalized investment costs."

Volkswagen reportedly plans to hit 10 million global sales per year as early as 2015, but to increase sales so dramatically, new plants must be built. The German automaker will open a U.S. plant in Tennessee next year, and there are plans to build two more assembly plants in China in an effort to increase sales in the world's largest car market to three million units per year within four years. VW's plan to spend over $14 billion in China through 2015 isn't even included in the $71 billion investment, either, as all China operations are run under a joint venture with FAW and SAIC.

Will Volkswagen reach it's very ambitious goal to hit 10 million annual sales by 2015? We have no idea, but we can at least say that The People's Car Maker plans to spend big while trying.



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