VW could outpace five billion euro cost-cutting threshold image

The German automaker’s works council leader, also its top labor chief, believes the company would be able to surpass the cost-cutting goals at the ailing passenger namesake brand by “substantially more” than the required 5 billion euros ($5.7 billion).

Volkswagen AG is today the world’s second largest automaker, but the rapid expansion has left holes in the company’s strategy and financial results – with the alarm signal triggered by the top-selling core passenger car brand, where earnings are not on par with the other divisions. To change that, the automaker’s top management decided to embark on an ambitious cost-cutting program, designed to save 5 billion euros annually. “With a bit more discipline one would easily be able to generate more efficiencies,” commented Bernd Osterloh, Volkswagen’s top labor representative, also claiming that potential savings at group level are even greater. The plan to save 5 billion euros by 2017 at the VW brand was unveiled back in July, with the company aiming to lift profitability at rival levels.

The savings profile seems to have been recently contradicted by the reported decision to embark on the development of a new generation of the loss-making Phaeton flagship. Osterloch also asked the top brass to put a cap on the costly expansion of the model lineup and parts range at the brand – in a bid to lift the unit’s earnings from below 3 percent to more than 6 percent by 2018. The executive, which also has a chair on VW’s 20-member supervisory board, said the situation in Russia led to a three-digit million-euro loss because of the currency headwinds – with the ruble taking a nosedive against the dollar on economic sanctions from the western nations over the political tensions with Ukraine and the collapse of crude oil price.

Via Reuters