Volkswagen is aiming for a sharp rise in annual cost savings to bolster its bottom line.
The efficiency program launched last year for the Volkswagen brand is aimed at eventually yielding efficiency gains of EUR5bn a year.
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VW Group CEO Martin Winterkorn says that the program has “got off off to a very good start”.
“We have identified opportunities for improvement that represent about half of our 5 billion EUR target. We expect a benefit of well over 1 billion EUR in our result for the current year,” he said.
The efficiency program for VW includes measures such as better utilising global plant utilisation, discontinuing some models and build combinations and a “strengthening of income options”.
“Our industry is facing radical changes that could be called historic. This is why we do not just have our sights set on the second half of the game. We are already looking far ahead, to the next season. Our ‘Future Tracks’ program is not only preparing the group for the technological challenges of the automotive world of tomorrow. Above all, it is also laying the foundations for long-term economic success, and for future generations at Volkswagen. In other words, ‘Future Tracks’ is our compass for sustainable and profitable, in short, for qualitative growth,” said Winterkorn.
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By GlobalDataReviewing VW Group 2014 results, Winterkorn said the group aims to grow further this year. “We want to get better in every respect in 2015 and take the next step towards the top,” he said.
Group deliveries grew by 4.2% last year to over 10.1m vehicles (2013: 9.7m). The Volkswagen Group’s sales revenue increased by 2.8% to EUR 202.5bn in fiscal year 2014 (previous year: EUR 197bn). The Group’s operating profit rose by EUR 1bn to a record EUR 12.7 bn (EUR 11.7bn in 2013).
The VW Group’s total delivery figures also include the vehicles sold by its Chinese joint ventures. Volkswagen sold 3.7m units in China last year; this was a 12.4% increase year-on-year. However, the group’s sales revenue and operating profit do not include the Chinese joint ventures. Their proportionate share of operating profit rose by over 20% to approximately EUR 5.2bn (EUR 4.3bn previous year). As a group, Volkswagen’s theoretical operating profit, including the proportionate share of the operating profit of the Chinese joint ventures, would be almost EUR 18 billion, the company said.
2015 outlook
VW is taking a cautious view on the outlook for this year, though it is looking for growth of revenue and operating profit. The company noted that difficult market environment, fierce competition, interest rate and exchange rate volatility, and fluctuations in raw materials prices all pose challenges. A positive effect is anticipated from the efficiency programs implemented by all brands and, increasingly, from the modular toolkits.
Depending on economic conditions, Volkswagen expects 2015 sales revenue for the group and its business areas to increase by up to 4% above 2014’s level. However, the company noted that “economic trends in Latin America and Eastern Europe will need to be continuously monitored in the Commercial Vehicles/Power Engineering Business Area”.
In terms of the group’s operating profit, Volkswagen anticipates an operating return on sales of between 5.5% and 6.5% in 2015 in “light of the challenging economic environment”.
“We are being deliberately rather more cautious – despite excellent figures we always have a good grip on reality”, said Winterkorn, and added: “You know us well enough: we’re never satisfied with just doing the minimum. Our stated goal for fiscal year 2015 is to achieve further growth both in terms of volumes and in our sales revenue and operating profit.”
