Germany’s VW AG should cater for leadership and cost woes image

Volkswagen, the second-largest automaker in the world and the biggest in Europe, has deep issues that range from having too many employees, not large enough earnings margins and a tendency to seek sales rather than profitability.

With brands that span from the affordable Skoda, mass-market Volkswagen, premium Audi and ultraluxury Bentley and Bugatti to truck maker MAN, the group should have enough resources to pull through anything the world economies throw at it. But the reality is there’s division instead of unity and even as sports car maker Porsche has the privilege of bringing home the largest earnings margin in the auto industry, the core passenger brand VW still needs to crank up cost cutting measures that upset some of its powerful union leaders. With profit under pressure, VW AG continues to allow Audi to increase all of its costs and drive down profitability in a bid to surpass BMW as the top manufacturer of premium autos.

With so many woes, investors on top also have to worry about incoming leadership – with supervisory board chairman Ferdinand Piech now 77 and the company’s administrative arm dominated by the state government of Lower Saxony and trade unions. Professor Ferdinand Dudenhoeffer from the Center for Automotive Research (CAR) at the University of Duisberg-Essen also points out that other investors have a more optimist approach to VW AG’s upcoming future, pointing out to the company’s great structural positioning and overall high level of quality. Some of the questions that surround VW AG might even be answered during the carmaker’s annual press conference in Berlin, scheduled this Thursday.

Via Forbes