Volkswagen AG, Europe’s largest automaker and the second biggest in the world, has devised a new strategy to reduce costs at its namesake brand by dropping the range of components.
According to a recent online presentation led by Chief Financial Officer Hans Dieter Poetsch, scaling back the variety of components employed in VW autos, such as the top-selling Golf and Polo hatchbacks will yield “significant savings potential,” for the Wolfsburg, Germany-based company – which already managed to meet its 2014 earnings goals. The group managed to keep its rank as the world’s second largest automaker, behind Japan’s Toyota Motor – after it delivered a record 10.14 million vehicles last year, reaching the threshold four years earlier than originally planned. The automaker now has another target – reach a 2018 profitability level and the drive to lower costs at its core passenger brand is a crucial step in achieving the goal, considering that Volkswagen is the group’s largest by sales. Poetsch used such examples as dropping by half the number of battery and interior-lamp models used in the ongoing generation Golf would assist the drive to slash overall costs.
The top executive also said the company is “well on track” to secure its goals within the three years timeframe as the 2014 group threshold was reached easily – including a 3% rise in revenue over the figure of 2013 and lifting operating margin to a 5.5 percent to 6.5 percent of sales bracket. VW’s core nameplate alone has a target of increasing earnings by 5 billion euros ($5.8 billion) by 2017 and achieving an operating profit of more than 6 percent of revenue by 2018 – more than triple of the 2.3% gained during the first nine months of last year.