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Productivity Gains Pledged At Volkswagen’s Troubled Core Brand

Productivity Gains Pledged At Volkswagen’s Troubled Core Brand
Even as German car maker Volkswagen battles to overcome its emissions scandal, by making use of strategies such as pushing for cost savings, stemming overseas losses and launching more higher-margin cars, the carmaker is targeting fixed productivity gains at its troubled core division through 2020.
Even as its auto sales slipped,  building on a strong rebound in the first quarter when cost cuts helped operating profit to surge to 869 million euros ($953 million)from 73 million a year earlier, positive development at Volkswagen's namesake VW brand may continue throughout 2017, the carmaker said on Friday.
"The substantial restructuring programs are bearing early fruits," VW brand chief executive Herbert Diess said at a press conference. "What's now crucially important is for us to continue along this path and work through our tasks ahead."
The key to turning the German giant into a more attractive business is a turnaround at the VW brand, which has long been saddled with high fixed and research and development costs, investors have said earlier.
The company said that after 1.8 percent in 2016, with revenue expected to exceed last year's adjusted result of 74 billion euros by around 10 percent, the VW brand is targeting an operating margin at the upper end of a 2.5 to 3.5 percent range this year.
Diess said that through the strategy of rolling out more sport-utility vehicles (SUVs) and pushing cost savings with a goal to reach break-even in these regions by 2020, this company, Europe's biggest carmaker, has pledged to further stem losses in North America, South America and Russia.
By the use strategies such as steps to increase output of vehicles based on the cost-saving MQB modular platform and a hard-fought deal with unions to cut red tape and jobs, especially in high-cost Germany, are among the other means for VW to improve productivity through 2020.
7.5 percent in each of this year and next, and a further 5 percent in 2019 and 2020 are the rates at which the company intends to raise productivity at its passenger-cars business, VW said on Friday.
Citing risks to the business such as volatile markets, its goals to increase the brand's operating margin to at least 4 percent by 2020 and to 6 percent by 2025, were again reinstated by the Wolfsburg-based company.
"We will critically review these financial targets and increase the guidance if necessary, as soon as we believe that what has been achieved is lastingly secure," VW brand finance chief Arno Antlitz said.

Christopher J. Mitchell

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