VW brand must become significantly more efficient, Diess says

September 12, 2018 12:12 CET — UPDATED: Sept 12 18:23 CET – adds details

HAMBURG — The VW brand needs higher profits and must become significantly more efficient to be able to finance its future, Volkswagen Group CEO Herbert Diess told the company’s staff magazine.

“A return on sales of 4 percent is the minimum needed, 5 percent to 6 percent would allow the company to make a few investments, and with 7 percent or 8 percent we would make it resistant to crises,” staff magazine inside on Wednesday quoted Diess as saying.

Since a 2016 labor pact, VW brand has lifted profitability to 4.1 percent of sales last year, up from 1.8 percent.

Diess warned that VW Group’s plan to offer an electrified version of each model will cost more than the original estimate of 20 billion euros ($23 billion), without providing a new figure. The company needs to reduce expenses more to be able to invest in future technology and weather crises, he said.

“The burden for our company, such as the cost of bringing to market electric cars, will be higher than expected,” Diess said in a joint interview with labor head Bernd Osterloh in the newsletter. “This is particularly so since some of our competitors have been making more progress.”

VW has outlined a group operating profit goal of as much as 8 percent of sales by 2025, which compares with a rise to 7.4 percent last year. For the VW brand, it’s aiming for at least 6 percent by then.

VW Group aims to launch 80 new EVs across its brands including Audi, Porsche, Skoda and Seat by 2025 and offer an electrified version of each of its 300 group models by 2030.

Bloomberg contributed to this report

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