Volkswagen group’s three-year capital spending plan for its automotive operations will be at its lowest level in more than a decade, said Automotive News Europe.
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With core vehicles such as the Golf and Passat already launched, VW said it plans to allocate EUR22.7bn to its core automotive operations over the next three years, or about 6% of its anticipated revenues.
That’s almost 1% more than VW will spend this year. But VW’s three-year plan of 6% spending will be its lowest average since 1993-1995, according to company information and industry analysts.
During the last 10 years, VW’s automotive investments have averaged 8.1% of sales. The industry average is 6.5%.
The reduction coincides with a maturing model line and other factors. “VW is coming off a peak in its model cycle, but the company is trying to tighten the purse strings to protect its credit rating, improve its balance sheet and save cash,” said Morgan Stanley London analyst Adam Jonas. “Volkswagen knows it needs to get rid of a lot of employees and that could cost E1bn.”
VW said its spending targets are designed to help the automaker reach its 2008 earnings goal.
VW group’s management board member in charge of finance, Hans Dieter Pötsch, said in a statement that VW remains “committed to our stated target of a pre-tax profit totalling E5.1bn for 2008.”
