Eight years later, Volkswagen once again offered a banner to cut costs to cope with pessimistic market expectations.
According to the German "Manager" magazine, Volkswagen Group CFO Hans Dieter Potsch recently revealed that Volkswagen plans to cut costs significantly and plan to cover all factories around the world because the public needs to face a decline in production and sales. Pressure, especially in the European and US markets, some non-productive investments will be postponed.
According to FAW-Volkswagen insiders, this cost-cutting plan affects all brands of the Volkswagen Group. In addition to the Volkswagen brand, high-end brands such as Audi will also be affected by this cost-cutting plan. According to the source, the overall production and sales volume of the Volkswagen Group has declined this year. Volkswagen Group expects this decline to continue in 2014 and must rely on cost cutting to maintain profitability. The specific plan for cost reduction will be introduced at the end of this year.
Cut costs
The German "Manager" magazine reported that in mid-September 2013, Volkswagen held an executive meeting at the Wolfsburg headquarters. Volkswagen Group CFO Hans Dieter Pan Shi believes that according to the current investment plan, the Volkswagen Group will not be able to Completing the 2015 profit target, Hans Dieter Pan suggested that Volkswagen cut its investment in production and need to cut the cost per vehicle by about 1,000 Euros.
Arno Antlitz, the executive of Volkswagen's passenger car brand, said that with the current operating conditions and market expectations, Volkswagen employees should tide over the difficulties with the company. He demanded a high-pressure policy for costs from all levels, regions and factories. In this way, the public can maintain its current profitability and dominance," Arno Antlitz said.
"Manager" disclosed that the high cost of the Volkswagen engine horizontal modular platform M QB (Modularer Querbaukasten) , which has caused a boom in recent years, is the main reason for jeopardizing the public profit target. In addition, the profitability of some new cars is not as good as the old ones. The profit margin of the next generation Volkswagen Touran dropped from 11% of the car price to 4%, while the profit margin of the next generation Tiguan was only 8%, down 9%.
Affected by this, Volkswagen Group announced a postponement plan for the development of its luxury brand models. The SUV of Lamborghini , the ultra-luxury brand of the Volkswagen Group, will be postponed. According to the news released by Lamborghini, in 2014, Lamborghini will launch a high-end SUV. However, affected by the cost-cutting plan, Volkswagen Group will postpone research and development investment in the model. During this year's Paris Motor Show, Lamborghini CEO Stephan Winkelmann said: "We are still optimistic about this SUV model market, even if Volkswagen Group gives up support for Urus, Lamborghini will continue to develop this model."
According to people familiar with the matter, Volkswagen's cost-cutting plan will affect all of Volkswagen's global factories, including the Chinese market, which currently accounts for more than 40% of Volkswagen's global production and sales. However, there are no specific cost reduction plan details that can be disclosed. "In the new fiscal year, there will be specific measures to be introduced." The above-mentioned sources revealed that "the days of the Volkswagen Group will not be too good, and the current market expectations are not optimistic. The Chinese market will fall, and the public will be in the global market." A thousand miles."
Investment dilemma
This is the second large-scale cost reduction plan after Volkswagen cut costs by 4 billion euros in 2005. In 2005, due to the sluggish European market, the public profit margin fell by 2.4%. Volkswagen achieved the goal of cutting costs by 4 billion euros by reducing labor costs and raw material costs.
The reason for the introduction of this year's cost reduction plan is the same as in 2005. In July and August of this year, Volkswagen's global production and sales declined. In September this year, Volkswagen's production and sales finally stopped falling, but in the future, due to the sluggish US market, Volkswagen's global production and sales expectations are not optimistic.
In the first half of this year, Volkswagen Group's operating income for the first half of the year was 98.687 billion euros, a year-on-year increase of 3.5%, but operating profit was 5.08 billion euros, down 11.6% year-on-year.
If the cost reduction plan is not carried out, Volkswagen's profitability will be embarrassed.
This may have an impact on the public's investment planning. From 2013 to 2015, Volkswagen Group will carry out an unprecedented large-scale investment plan with a planned investment of 50.3 billion euros. This year is the first year of planning investment by the Volkswagen Group, and it is also a relatively concentrated year.
"The above investment plan was introduced to achieve the 2018 strategic goal of producing and selling 10 million vehicles in 2018 and becoming the world's largest auto company. At present, due to the continuous decline in production and sales in the US market for 9 months, Volkswagen's global production and sales growth appears. "The bottleneck," said Cheng Wenbing, general manager of Maiwei Consulting. "And, the forecast of global auto production and sales in 2015 is not optimistic. This is not good news for the public. If you stick to the previous investment plan, Volkswagen will appear. The contradiction between too much and the sluggish market has led to a continued decline in its profitability, creating a vicious circle in which the public will not be able to complete the 2018 strategy."
Chinese market influence
The Chinese market will be affected by this plan to reduce expenses and cut costs.
According to FAW-Volkswagen insiders, this year, in response to the government's "eight regulations," FAW-Volkswagen has cut a lot of costs in marketing and other fields. “FAW-Volkswagen's marketing expenses are much more compressed than last year. The budget of all marketing activities is compressed to a minimum. Marketing is the closest to the market, and the market is the most effective. The product promotion and brand image of the company also depend on Marketing support and maintenance, compression of this cost will continue to damage the enterprise." The above said, "This year, whether it is Audi or Volkswagen brand, this compression of marketing costs has led to market fluctuations, the first half of this year, Audi The increase in production and sales was lower than the overall increase in luxury cars for the first time . Although Audi successfully solved the problem, it was a dangerous signal."
Volkswagen's cost-compression program will put a double pressure on its performance in the Chinese market. The current cost control plan is dominated by the Chinese side, and the future German side will continue to pressurize the cost, which will form the dual pressure of the Chinese to reduce the marketing cost and the German side to reduce the production cost.
In September 2013, Volkswagen's sales in China reached 233,500 units, up 16.8% year-on-year. Volkswagen's production and sales in other markets around the world are flat, slightly increasing or falling, and only the Chinese market has grown by more than 15%. At present, the proportion of production and sales contributed by the Chinese market to the Volkswagen Group has risen to 44.4%. This means that the Chinese market is almost half of the global mass production and sales volume.
In Volkswagen's 2018 strategy, the Chinese market contributes 40% of the production and sales volume to the Volkswagen Group. At present, the proportion of the Chinese market has exceeded 40%. However, the compression of marketing costs may affect the growth of Volkswagen's brands in China.
FAW-Volkswagen insiders revealed: "On the one hand, the launch of the red flag will affect Audi's position in the procurement of official vehicles, which will continue to hurt Audi. On the other hand, the competition and continuous investment of Mercedes-Benz and BMW will also be detrimental. Audi's development in China. But according to our expectation, under the control of high-pressure cost, Volkswagen's profitability in China will not be affected next year."
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