Volkswagen reportedly will not stop trying to shave billions off its cost base just because its “ForMotion” efficiency programme will be completed by the end of this year.
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“That cannot come to an end in 2005,” VW chief executive Bernd Pischetsrieder told Reuters in Los Angeles, where he was attending the premiere of the newly redesigned, Mexican-built Jetta compact sedan, which will be sold in most other markets as the Bora.
After stripping away excess fat of well over €1 billion ($US1.32 billion) in 2004, VW expects ForMotion will help boost earnings by €3.1 billion this year, the report said.
Reuters noted that VW lowered its 2004 earnings guidance by €600 million to a worst-case scenario of €1.9 billion in operating profits before special items, and added that Pischetsrieder didn’t retract that goal in Los Angeles.
Speaking about the high steel prices, Pischetsrieder reportedly warned that they “probably won’t go by without leaving a trace,” as suppliers will likely be forced to raise their prices to account for higher input costs.
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By GlobalDataPischetsrieder reportedly said he was concerned about Chinese joint venture partner Shanghai Automotive’s decision to take the leadership in a joint venture with British carmaker Rover.
“We decided not to try to prevent it, but still it’s cause for some worry,” he told Reuters.
The news agency said the relaunch of the Jetta, based on the group’s flagship Golf hatchback, is a key element in an expected turnaround of its US business.
82,221 Jetta sedans were sold in the United States during 2004 and the model contributed over 32% of all VW brand sales in the world’s largest car market, Reuters said.
However, a steep rise in the euro-dollar exchange rate, an ageing stable of models in the US and an unforgiving price war there has cost VW severely – car sales dropped by more than 15% in the past year to just 256,111 vehicles, shy even of the 260,000 sold by BMW, the report added.
VW brand sales chief Georg Flandorfer wouldn’t comment to Reuters on the sales target for the new Jetta, but he did say that thanks partly to its relaunch, the company is expecting VW brand car sales in the United States to remain at least stable this year.
The report said Volkswagen, which started hedging its dollar exposure relatively late, expects to post an operating loss of around €1 billion in North America for 2004 and said it was not optimistic about breaking even this year despite the scheduled launch of the new Jetta and a redesigned larger Passat.
Other reports from the show said VW had decided not to build an assembly plant in the US and would counter the falling value of the dollar versus the euro by shipping more cars from its plants in Mexico and Brazil.
