Report – Volkswagen ready to set new investment plans image

Volkswagen Group’s supervisory board should approve a five-year spending plan on Friday that aims to make the German carmaker the worlds biggest while also trimming investment, as revenues get tighter.

An official from the firm’s workforce, which is represented on the 20-member body, told Reuters the supervisory board would meet at the Wolfsburg headquarters on November 22. VW declined comment on the official’s remarks that the meeting would sign off on spending targets out to 2018.

With costs rising and a strong euro hurting export income, analysts expect VW to trim investment in capacity and projects not related to model development – though it may shield product-related spending from cuts as it tries to overtake Toyota and General Motors in numbers of vehicles sold.

“VW is burdened with steadily rising costs and slowing revenue,” said Arndt Ellinghorst, head of automotive research at London-based International Strategy and Investment. “They’re well advised to step on the spending brakes.”

Compared to European rivals Fiat and PSA Peugeot Citroen, Volkswagen has weathered the region’s six-year slump well, thanks to luxury marques Porsche and Audi, which account for only 15 % of its sales but contributed two thirds of its profits so far this year. Some analysts also note that research and development spending at Audi has lagged BMW and Daimler’s Mercedes and argues that it should be improved.

Yet generating cash to fund global expansion is getting harder as it balances rising short-term costs with upgrades and additions to a fleet of some 300 models that ranges from budget Skodas and SEATs, through the VW Golf, Europe’s best-selling car, to buses and trucks carrying the MAN and Scania badges.

Planned automotive spending at the group, which has 12 brands and 105 factories, almost doubled to 16.7 billion euros a year in a three-year program set in 2012 from an annual 8.6 billion euros budgeted in 2009, according to VW data.

Steady investment helped consolidate its lead over Peugeot and Fiat, which were forced to slow down or even shelve entire vehicle programmes, technologies and platform makeovers.

Via Reuters