Volkswagen Group to cut overall spending by ~€1B next year, but to boost investments in electric drive tech by €100M
The Volkswagen Group is cutting its planned investments in its Automotive Division for next year as it girds itself for the financial impacts of responding to the diesel emission issue. The Group will cap planned investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs (capex) at approximately €12 billion next year—a cut of about €1 billion from earlier plans.
At the same time, however, the Group intends to increase spending on alternative drive technologies by approximately €100 million next year, with the core focus to be on rapidly developing electric drive systems for the for the Volkswagen Passenger Cars, Audi and Porsche brands, according to Matthias Müller, Chairman of the Board of Management of Volkswagen AG.
We are operating in uncertain and volatile times and are responding to this. We will strictly prioritize all planned investments and expenditures. As announced, anything that is not absolutely necessary will be cancelled or postponed. We are not going to make the mistake of economizing on our future. For this reason we are planning to further increase spending on the development of e-mobility and digitalization.—Matthias Müller
Most of the capex is earmarked for new products, the continuing rollout and enhancement of the modular toolkits, and the completion of ongoing investments to expand capacity. Examples include product start-ups such as the next-generation Golf, the Audi Q5, the new Crafter plant in Poland, as well as upfront expenditures for the modular electric toolkit (MEB).
Approximately 50% of capex will be spent on the Group’s 28 locations in Germany.
Müller also outlined the first projects as examples where investments are being spread out to a greater extent or cut back. For example, construction of the planned new design center in Wolfsburg is being put on hold, saving approximately €100 million.
In addition, the construction of a paint shop in Mexico will be reviewed. In the model range, the successor to the Phaeton—a pure-play electric model—is being delayed.
We will review and potentially cancel further expenditures or spread them out to a greater extent in the next few weeks, but without putting our future viability at risk. Together with the works council representatives we will make every effort to keep our core workforce on board.—Matthias Müller
The joint ventures in China are not consolidated and are therefore not included in the above figures. These companies will maintain their previously announced investment levels and are planning expenditures in the amount of approximately €4.4 billion in 2016. These investments will be financed from the joint ventures’ own funds.