Amid a damaging bribery scandal, Volkswagen on Wednesday detailed a plan to boost net profit by €4 billion ($US4.9 billion) by 2008 while improving quality at its core VW brand, Reuters reported.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Europe’s biggest car maker is targeting savings and performance enhancements of more than €10 billion to reach this net profit target, a source close to the company told the news agency.
“All brands together are expected to cut costs and enhance their performance by at least €10 billion by 2008,” the source said, adding, though, that “this (sum) is not an earnings improvement target”.
The Volkswagen brand passenger car operation alone aims to contribute €7 billion to the total, Reuters noted.
The report said VW detailed its savings targets in slides posted on the internet before an eagerly awaited conference call by former star Chrysler manager Wolfgang Bernhard – brought in this year to turn around the VW Brand Group.
According to Reuters, the group’s core VW brand aims to save over €3 billion on material costs, €1 billion on production costs, €500 million on overhead and €500 million on warranty costs, while improving its performance in sales and distribution by over €2 billion.
As part of a quality drive, Bernhard reportedly plans to halve warranty claims for VW brand cars that are up to 12 months old.
The group reiterated its target of hitting a 9% return on investment but gave no timetable for this.
Traders told Reuters the market was disappointed that VW had not announced even tougher steps to boost earnings such as closing a plant in high-wage Germany.
The news agency noted that VW stock has outperformed the index by more than 10% so far this year as investors bank on a significant turnaround in VW earnings in the future.
