The rising costs of its emissions scandal pushes Volkswagen into the red in the third quarter of 2015, but the firm has a plan to fight back.
29 Oct 2015 | 3607 Views | By Darren Moss, Autocar UK
Volkswagen boss Matthias Müller says the company will emerge from its current emissions scandal “stronger than before” and has set out five priorities for turning the fortunes of the German manufacturer around.
Unsurprisingly, Müller says his top two priorities are to rectify those cars affected by the emissions scandal ...
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Volkswagen boss Matthias Müller says the company will emerge from its current emissions scandal “stronger than before” and has set out five priorities for turning the fortunes of the German manufacturer around.
Unsurprisingly, Müller says his top two priorities are to rectify those cars affected by the emissions scandal and to investigate how the installation of the so-called ‘defeat device’ became so widespread. In a statement, he said: “Our customers are at the core of everything that our 600,000 employees worldwide do.
“We must uncover the truth and learn from it.”
As well as investigating the matter internally, Volkswagen has also engaged an independent auditor to assess its findings. Müller has stressed that those responsible will face severe consequences.
Beyond the immediate investigation, Müller says that another of the VW Group’s top priorities will be to realign itself with a more decentralised structure. In addition to the personnel moves and group realignments already announced, Müller says that “the key point is that Group management will be decentralised to a greater extent in the future” – something designed to give the different brands in the group more independence in their own regions.
Hinting at a possible radical realignment of the brand’s future model portfolio – already known to be affected thanks to £750m (Rs 7,382 crore) in reduced spending per year – Müller said: “We will review in detail our current portfolio of more than 300 models and examine the contribution that each one makes to our earnings.”
Müller’s fourth priority is described as being ‘a realignment of the Group’s culture and management behaviour’ – with Müller noting that changes are necessary in how Volkswagen “communicates and how it handles its mistakes”. Many have been critical of how slowly VW has appeared to communicate with an apologise to its customers, but Müller has stressed that “we need a culture of openness and cooperation.”
Beyond those priorities, VW is working on a new plan dubbed the new Group Strategy 2025. An evolution of the current Strategy 2018 plan, the new initiative will be unveiled in full towards the middle of next year. Müller said: “Many people outside of Volkswagen, but also some of us, did not understand that our Strategy 2018 is about much more than production numbers. A lot of things were subordinated to the desire to be “Faster, Higher, Larger”, especially return on sales.” Instead of sheer volume, says Müller, the focus of the plan will instead be on qualitative growth.
VW reports first loss for 15 years
Yesterday, VW reported a loss for the third quarter of 2015, as the costs of its emissions scandal continue to rise. It is the firm's first quarterly loss in 15 years.
As a result of the €6.7bn Rs 51,214 crore) the German manufacturer has set aside to cover the costs of rectifying vehicles fitted with its defeat software, Volkswagen has reported an operating loss of €3.48bn (Rs 26,601 crore) for the third quarter of this year, as well was a pre-tax loss of €2.52bn (Rs 19,262 crore).
Despite the news, shares in Volkswagen were up in Frankfurt.
In a statement, Volkswagen only refers to the scandal as the “diesel issue”, with Müller saying: “The figures show the core strength of the Volkswagen Group on the one hand, while on the other the initial impact of the current situation is becoming clear. We will do everything in our power to win back the trust we have lost.”
The statement also notes that, “because of charges related to the irregularities in the software used for certain diesel engines, we expect 2015 operating profit for both the Group and the Passenger Cars Business Area to be down significantly year-on-year.”
VW Group sales in September were down 1.5% year-on-year, while Group sales for the third quarter were down 3.4%, to 2.39m cars, less than Toyota recorded.
However, the firm has already set out its recovery plan, which hinges on a next-generation version on the Phaeton. The new model was confirmed for production earlier this month, and will arrive as an all-electric rival to the Tesla Model S.
The new car will “be the flagship of the brand’s profile over the next decade", the company says. The Phaeton is expected to reach production in 2020.
Revealing details of the car's specification for the first time, Volkswagen said the car will feature "a pure-electric drive with long-distance capability, connectivity and next-generation assistance systems”.
Wolfsburg insiders with knowledge of Volkswagen’s future model plans say the electric Phaeton will share its platform architecture, drive system and battery technology with the upcoming Audi Q6 e-tron – as previewed by the e-tron Quattro concept at the Frankfurt motor show.
Volkswagen will reduce spending by €1 billion (Rs 7,644 crore) per year in the wake of the dieselgate emissions scandal, as well as refocusing its development plans as the firm seeks cut costs and reaffirm its environmental credentials among car buyers. VW traditionally invests around €10bn (Rs 7,6440 crore) per year on research and development alone.
Among the most radical decisions is an overhaul of the VW Group’s approach to diesel engines. From now on, the group will only use modern diesel engines with selective catalytic reduction and AdBlue injection in Europe and the United States – the two regions most heavily affected by its emissions scandal.
Development and modification of the group’s standardised MQB platform will also be accelerated, with a focus on bringing a new generation of plug-in hybrid vehicles to market. VW says it wants to produce hybrids with greater range, as well as developing new mass-market electric vehicles with a range of more than 186 miles/297km. Alongside the new models, VW will also develop a new 48V mild hybrid system and create more efficient petrol, diesel and CNG engines.
Volkswagen will also create a new modular electric toolkit – dubbed MEB - which will be used across the VW Group brands. The toolkit be used for both passenger cars and LCVs and will be designed for all vehicle and body types. VW says the MEB toolkit will allow for “particularly emotional vehicle concepts”, and will enable an all-electric range of 250-500km (155-310 miles).
Hinting that the Group is also well on the way to developing purely autonomous vehicles, the statement also says: “A new standard with regard to connectivity and driver assistance systems is to be defined.”
Additionally, Volkswagen will accelerate its current efficiency programme. Company chairman Dr. Herbert Diess said: “The Volkswagen brand is repositioning itself for the future. We are becoming more efficient, we are giving our product range and our core technologies a new focus and we are creating room for forward-looking technologies by speeding up the efficiency program.
“We are very aware that we can only implement these innovations for the future of the Volkswagen brand effectively if we succeed with our efficiency program and in giving our product range a new focus.
“We are working at top speed on these issues. The Volkswagen team has proved it stands united and is fully focused on shaping the future. We have now laid the further foundations for that."