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VW says technology costs to limit 2012 profit

A Volkswagen Beetle (right) and an UP! are pictured in a delivery tower at the company’s headquarters in Wolfsburg. — Reuters picA Volkswagen Beetle (right) and an UP! are pictured in a delivery tower at the company’s headquarters in Wolfsburg. — Reuters picWOLFSBURG, Germany, March 13 — Volkswagen’s pursuit of profit may take a breather this year as Europe’s largest carmaker invests in a major technology overhaul.

German group VW has a goal of matching last year’s record €11.3 billion (RM45 billion) operating profit in 2012 before aiming for another increase in 2013, it said yesterday. Revenue may beat last year’s €159.3 billion in 2012 and 2013.

“We need to recoup our substantial development and start-up costs,” Chief Executive Martin Winterkorn said at a news conference.

Steps introduced in 2012 to expand parts-sharing across VW’s range of small and compact vehicles may yield “substantial savings” over the longer term, he said.

VW is launching a new architecture to build small and mid-sized cars across group brands such as luxury division Audi and Czech unit Skoda by enhancing the use of standardised components such as axles and chassis.

The new technology, designed to build as many as 3.5 million vehicles stretching from VW’s Polo subcompact to the mid-sized Passat sedan, may absorb about €15 billion of costs through 2016 to adapt factories to new production patterns, chief financial officer Hans Dieter Poetsch said.

The technology overhaul will first affect German plants in Wolfsburg, Zwickau and Ingolstadt and allow VW to cut production costs 20 per cent and shorten assembly times 30 per cent over time, the car maker said.

“The modular transverse toolkit will play a decisive role for our future” as VW is striving to become the biggest and most profitable auto manufacturer by 2018, Poetsch said. About three quarters of models built by VW group brands will be affected by the changes, the CFO said.

VW maintained its upbeat outlook for world auto markets. Continued growth of car markets in Asia, the United States, Latin America and Russia may help VW to increase group deliveries this year beyond the record 8.3 million cars achieved in 2011. The company plans to roll out more than 40 new models or updated vehicles in 2012, according to CEO Winterkorn.

VW said last month fourth-quarter operating profit slipped nearly one per cent to €2.29 billion. The company plans to increase its dividend by 80 cents to €3 per share for common shareholders and €3.06 for preferred.

VW is striving to become the biggest and most profitable auto manufacturer by 2018. — Reuters picVW is striving to become the biggest and most profitable auto manufacturer by 2018. — Reuters picMore flexible

“The unbroken automotive boom is providing an additional tailwind for our growth plans,” Winterkorn said yesterday, adding that the global market for passenger cars and light commercial vehicles could exceed 100 million units by 2018.

VW’s new compact car production system is more flexible than previous platforms and allows the carmaker to build models with different height, width and length. The first models to be built on the architecture are Audi’s new A3 compact and the next generation of VW’s Golf, the carmaker’s best-selling vehicle.

VW is still facing hurdles to combining with Porsche SE’s automotive operations, Winterkorn said. VW faces having to pay about €1 billion in tax if it were to buy the remaining 50.1 per cent of Porsche’s car-making business before 2014.

The German manufacturer dropped plans for a full merger with Porsche last September after lawsuits against the sports-car manufacturer in the United States and Germany complicated Porsche’s valuation.

“All parties involved are continuing to work at full speed on achieving the integrated automotive group with Porsche at conditions that make good economic sense,” the CEO said.

VW shares were down 1.7 per cent at €140.35 by 12.44pm British time (8.44pm Malaysian time), against a 0.2 per cent drop in the German DAX index. — Reuters

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