Friday 20 November 2015

VW slashes its capex by €1 billion

Volkswagen Group, in “aligning its investment activity” in its Automotive Division, is capping investments in property, plant and equipment, investment property at €12 billion for 2016 against €13 billion normally.

Despite the cuts, VW is planning to increase expenditure on alternative drive technologies by €100 million next year.

But, among the first projects where investment is being spread out or cut back is a planned new design centre in Wolfsburg, now on hold, saving approximately €100 million. Also construction of a paint shop in Mexico will be reviewed, while in the model range, the successor to the Phaeton – a pure-play electric model – will be delayed. The new model of this marque is unlikely to be missed by many; it adds very little to the VW line-up and could easily be dropped altogether.

“We are not going to make the mistake of economizing on our future. For this reason we are planning to further increase spending on the development of e-mobility and digitalization”, said Matthias Müller, chairman of the board of management of Volkswagen AG. “The core focus will be on rapidly developing electric drive systems for the Volkswagen Passenger Cars, Audi and Porsche brands.”

Added Müller: “We are operating in uncertain and volatile times and are responding to this. We will strictly prioritize all planned investments and expenditures. As announced, anything that is not absolutely necessary will be cancelled or postponed.”

The question is: Who in VW was responsible for making these “uncertain and volatile times”? There was no hint of these times three months ago.

Meanwhile, Müller confirmed most of the capex is earmarked for new products, the continuing rollout and enhancement of the modular toolkits, and the completion of ongoing investments to expand capacity.

Examples include product start-ups such as the next-generation Golf, the Audi Q5, the new Crafter plant in Poland, as well as upfront expenditures for the modular electric toolkit (MEB). These are so far gone they cannot be stopped, it has to be assumed. Half of capex will be spent on VW’s 28 locations in Germany.

Müller added: “We will review and potentially cancel further expenditures or spread them out to a greater extent in the next few weeks, but without putting our future viability at risk. Together with the Works Council representatives we will make every effort to keep our core workforce on board.”

The joint ventures in China are not consolidated and therefore not included in the above figures. These companies will maintain their previously announced investment levels and are planning expenditures in the amount of approximately €4.4 billion in 2016. These investments will be financed from the joint ventures’ own funds.

                                 Union changes at board level

Meanwhile, there are changes have just taken place on VW’s supervisory board.

Jörg Hofmann (59), first chairman of IG Metall, and Johan Järvklo (42), representative of the Swedish Metal Workers’ Union at Scania, were appointed members by Braunschweig Local Court – Hofmann effective November 20, 2015, Järvklo effective November 22, 2015.

They were caused by retirement of Berthold Huber (65) and Hartmut Meine (63), who “laid down their mandates” on the board with due notice.

Chairman of the board, Hans Dieter Pötsch, thanked departing members for so many years of service on the executive body, extending special thanks to Huber, who held the office of interim chairman of the board for several months this year, shouldering “great responsibility during a critical phase” and for helping to “strengthen our company”.

“He brought the full weight of his experience and authority to bear in the service of our Company. We are particularly grateful to him for that,” added Pötsch.

Dr. Wolfgang Porsche, a member of the executive committee and a representative of the family shareholders on the supervisory board, underscored with fulsome praise: “As chairman of IG Metall, Huber was instrumental in developing innovative and flexible collective agreements that safeguarded jobs in German industry without compromising the competitiveness of companies. He was a resolute negotiating partner, always willing to compromise, free from ideology and therefore respected by all. More than once, he displayed courage in critical situations and assumed personal responsibility. On behalf of the shareholders I would like to express our warm appreciation of that. For me, he has always been a moral role model.”

Bernd Osterloh, member of the executive committee and chairman of the general and group works councils of VW, enthused: “I have known Berthold Huber for almost 30 years. I have always respected him as someone who is a good listener and a fair sparring partner, willing to search for the right decisions. That has proved particularly valuable during the past difficult weeks. Berthold Huber has played a key role for Volkswagen and for our colleagues. I would like to express my sincere thanks for that. I am sure he will continue to support us in future. His successor is Jörg Hofmann, who has agreed to join Europe’s largest automaker. The appointment of Johan Järvklo from Sweden sends a clear signal that as employee representatives we feel it is important to give our colleagues from international locations the opportunity to participate in the highest executive body.”

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