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Herbert Diess: Volkswagen must become far more efficient

The Volkswagen Group continued its profitable growth course in the first half of 2018, in terms of deliveries, sales revenue and earnings before special items. During a press conference, CEO Herbert Diess focused on future challenges. The company’s chief executive expressed his satisfaction with the company's performance during the first half of the year. “However, we cannot rest on our laurels because great challenges lie ahead of us in the coming quarters – especially regarding the transition to the new WLTP test procedure.” Growing protectionism also poses major challenges for the globally integrated automotive industry, he noted.

Frank Witter, Functional Responsibility 'Finance and Controlling'
Frank Witter, Functional Responsibility 'Finance and Controlling'
Dr. Herbert Diess, Chairman of the Board of Management of Volkswagen AG and Chairman of the Board of Management of the Volkswagen Passenger Cars brand

In the morning, the Volkswagen Group announced very solid sales revenue and operating profit growth:

  • In the period from January to June, Group sales revenue rose from EUR 115.3 billion to EUR 119.4 billion year-on-year.
  • Operating profit before special items increased from EUR 8.9 billion to EUR 9.8 billion, however, expenditures of EUR 1.6 billion in connection with the diesel crisis were recognized in the second quarter.
  • The operating return on sales before special items rose from 7.7 to 8.2 percent. The Group’s profit after tax for the first six months was up 2.1 percent year-on-year to EUR 6.6 billion.
  • Globally, the Volkswagen Group delivered 5.5 million vehicles to customers in the first half of 2018. This means an increase of 7.1 percent compared with the prior-year period.
The growth shows that customers are really excited about the broad range of new models being offered by the Group’s brands, Diess said.

“Over the coming months, we will do everything in our power to validate the trust of our customers worldwide. Our stated goal is to transform Volkswagen into our industry’s leading company in terms of profitability, innovative power, sustainability and customer satisfaction.”

Herbert Diess CEO
Dr. Herbert Diess, Chairman of the Board of Management of Volkswagen AG and Chairman of the Board of Management of the Volkswagen Passenger Cars brand

The CEO said the topic of WLTP posed the greatest risk in terms of volume and profit. Between August and October, certain model variants will experience production bottlenecks and plants will be closed on certain days at the company’s locations, he said. Diess added: “We are firmly committed to our delivery goal for the entire year. But one other thing is clear: The second half of the year will require a huge effort, also in terms of margins.” The Group expects the continued model offensive to provide a further boost.

Diess emphasized that the new Board of Management is systematically moving forward with the Group’s realignment. As examples, he cited the independence of Volkswagen Truck&Bus, the conversion of Components into a separate business entity and ground-breaking alliances with Hyundai and Ford. In addition, the Group has acquired a majority stake in QuantumScape. The investment of more than USD 100 million is a key aspect of the Group’s battery strategy. Diess added: “One of our long-range goals is to establish a production facility for solid-state batteries by 2025.”

“We will continue to set very ambitious goals.”

The CEO stressed that he was determined to make both Volkswagen as a whole and all of its brands significantly more efficient, productive and profitable: “We will continue to set very ambitious goals.” Volkswagen has become a very product-oriented company in recent decades, Diess said. “The strong focus on products is fundamentally good because it has resulted in superior vehicles. We will definitely continue to focus on this aspect. But it has also cost us efficiency and returns.” he explained. In particular, Volkswagen must focus much more closely on production and processes regarding the volume brands, the CEO said. “But we have no intention of giving up the superior product substance that has made us so successful. This will be a paradigm shift for our company.”

“We have declared war on bureaucracy, including at the headquarters.”

Diess described initial concepts as very promising. “As part of a process affecting all plants, we intend to work with the brands and boost efficiency by around 30 percent by 2025: in terms of factory costs, productivity and investments.” Diess also plans to significantly reduce the costs of Group administration. “We have declared war on bureaucracy, including at the headquarters.”
At the same time, Volkswagen plans to substantially expand its software expertise and digital networking. The company has also set the course for electromobility. Diess said: “By 2020, the entire Group will introduce 50 new electric models on the market. The Audi e-tron* will go on sale in just a few weeks. It will be joined by the Porsche Taycan* from Zuffenhausen next year. We intend to define the Golf class for the electric age with the VW I.D.*. The preparations are in full swing.”