Business Essentials for Professionals


Volkswagen Confident Of Increasing Profit Margins From Cost Cuts

Volkswagen Confident Of Increasing Profit Margins From Cost Cuts
A day after it unveiled its ambitious electric mobility expansion, the German auto giant and the second-largest car maker of the world Volkswagen said that it will be able to increase its profit margins second-largest carmaker because of the cost cutting strategies it has put in place.
"Our good performance in 2020, a year dominated by crisis, will give us momentum for accelerating our transformation," the company’s Chief Executive Herbert Diess said in a statement.
There was a 5 per cent rise in the preferred shares in the company to reach their highest level since July 16, 2015. The current market valuation of the company reached more than 116 billion euros ($138 billion) because of this rise. The market value of the company is now up by one third so far this year. 
Volkswagen said that it has set a target of achieving more than double its current number for deliveries of electric vehicles to reach 1 million by this year. The company also added that a standardised platform model, which had been introduced in the for vehicle production years ago, would also now be applied to software, batteries and charging.
A day ago, the company unveiled its new strategy of building half a dozen battery cell plants in Europe as well as expanding its infrastructure for charging electric vehicles globally as it accelerate its target of over taking the United States based electric car maker Tesla.
The German auto major has set to achieve an operating margin of between 7 and 8 per cent by 2025. The company also added that it has set its eyes to likely end the current year at the higher upper end of its 5-6.5 per cent target spectrum.
In comparison, an adjusted operating profit margin of between 5.5 and 7.5 per cent this year was announced to be achieved by Stellantis, the resultant entity created by the merger of FCA and Peugeot maker PSA in January and also the fourth largest car maker of the world.
The company targets to achieve this through a lowering of its fixed costs by 2 billion euros by 2023 at 2020 levels which would be a decline of 5 per cent. The company also wants to achieve a cut of 7 per cent in its materials costs over the same period.
Early or partial retirement to older employees was also offered by Volkswagen in order to be able to better handle the company’s personnel costs. And according to sources this move by the company could result in the company being able to cut down as many as 4,000 jobs at its factories in Germany.
There are about 670,000 employees of the company globally. 
"We aim to put the ambitious transformation of the Volkswagen Group on a solid financial basis," incoming finance chief Arno Antlitz said.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc