One of the reasons why Volkswagen is hitting on all cylinders (don’t be U.S. myopic – always measure a car company by global success) is that they did not stop investing in the wake of the 2008 crash. They did not have to: Sales in the U.S. were low, and where you don’t have a lot, you can’t lose a lot. At the same time, VW had the big luck of being a major player in China. While U.S. and Japanese car companies stopped or severely dialed back their investments into R&D and capacities, Volkswagen kept on spending. This has a delayed effect of 3 to 5 years, and what we are seeing now is just the beginning of this effect. It is also the beginning of an even greater spending spree.
The Volkswagen Group will invest around €62.4 billion ($86 billion) in the coming five years. This investment plan has been approved in a Volkswagen Supervisory Board meeting yesterday.
Investments in property, plant and equipment will account for €49.8 billion ($68.7 billion). On top of this will come capitalized development costs of €11.6 billion ($16 billion). All in all, Volkswagen wants to invest around six percent of sales into the future. According to the press release, Volkswagen wants to safeguard that future “by building new production facilities, introducing new models and developing alternative drives, as well as with its modular toolkits.”
Speaking of VW’s future are they ever going to sell the Scirocco over here?
When they fit the 2.5L 5 cyl. engine into it.
So $86,000,000,000 must be what it costs to get Lucy Liu to stand next to the old guy… :P
Just because you can’t afford it doesn’t mean its that expensive.
time heals all wounds and apparently also makes memories fade. Roger Smith proved that capital expenditures don’t necessarily breed successs. creativity trumps capital in the pursuit of sales and profit.
Well, capital is essential too. Studebaker-packard at the end of its life was quite creative in revamping their products, but without funds, they’re doomed to failure
Good point. You could say the same thing about the last days of AMC, a creative group that later did wonders energizing Chrysler with K-car money. Then Iacocca chose as his successor that GM guy Eaton who threw it all away.
As some major competitors have significantly reduced their R&D, VW’s refusal to do the same coupled with an aggressive world marketing campaign might make this car maker’s dreams come true.
VW’s mgmt being an admirable game player here, putting money where the mouth is. But fate had Toyota soon taking a hit after passing GM. Wolfsburg we need to strive to improve our quality and reliability nemesis – some lessons to be learned from South Korea here.
VW fears only South Korea.
Upgrading capital and infrastructure are exactly what you are supposed to do during a downturn, by the time the economy swings the other way, it will be too late.
That’s $17.2 billion a year. Isn’t Daimler planning to spend 20 billion euros in the next two years? How much does the Birch 3 spend again?
Volkswagen AG is open to a takeover of Suzuki Motor Corp. if the Japanese automaker persists in dissolving the alliance between the two companies, Spiegel magazine reported, citing a Volkswagen manager it didn’t identify ( http://www.bloomberg.com/news/2011-09-18/volkswagen-open-to-suzuki-takeover-if-tie-up-ends-spiegel-says.html ) .
How time changes everything. Who would have thought 20 years ago that VW and Hyundai would be the guys to chase in the automotive world?
They have come a long way from the MK IV series and the original Excel.