Tuesday 6 December 2016

Volkswagen plans to simplify engineering to revive profits

The move is part of a 12-point recovery plan laid out to VW managers, writes Christoph Rauwald

Christoph Rauwald

Published 10/01/2016 | 02:30

Volkswagen has hatched plans to break some expensive habits: developing new car parts from scratch when existing ones would do or making last-minute changes to new vehicles just before they start production. Photo: AP
Volkswagen has hatched plans to break some expensive habits: developing new car parts from scratch when existing ones would do or making last-minute changes to new vehicles just before they start production. Photo: AP

Volkswagen has hatched plans to break some expensive habits: developing new car parts from scratch when existing ones would do or making last-minute changes to new vehicles just before they start production.

  • Go To

The policy revisions are part of a 12-point strategy laid out to managers by the brand's new chief, Herbert Diess, according to people familiar with the plans, who asked not to be named because the talks were private.

Diess has also proposed streamlining costs and expenses, regional decision-making and communication, and entering three new markets, the people said.

Diess is taking the first steps on a pledge to transform a culture created over decades of top-down leadership by former chairman Ferdinand Piech and Martin Winterkorn, who resigned as CEO after the company admitted to cheating on diesel emissions tests. Hired from BMW before the scandal broke, Diess had already been asked to boost margins, which are lower than those at mass-market competitors.

That need has become more acute as VW faces the prospect of multi-billion- dollar fines.

"VW has a number of areas where Diess can lower costs," said Sascha Gommel, a Frankfurt-based analyst for Commerzbank. "They can reduce model variants, look at the number of components they manufacture themselves - like BMW has already done - and have more common parts" used in different cars.

The group spent more on research and development than any other public company from 2012 through 2014, according to data from consulting firm Strategy&. But auto industry executives rank Volkswagen's innovation and technology only sixth worldwide, according to a KPMG International survey published on Thursday.

BMW and Toyota led the ranking by far.

Diess, who joined the Wolfsburg-based manufacturer in July, is pushing to re-use technology and components whenever possible and to avoid the kind of top-down fussing over details, down to the trim on the dashboard, that was common under Winterkorn and Piech.

That triggered substantial unexpected costs on past models including the Touran minivan, according to people familiar with the vehicle's introduction.

Bloomberg

Read More

Promoted articles

Editors Choice

Also in Business