VW to invest $85 billion by 2016 to increase production, develop advanced technologies

Volkswagen AG says it will invest €62 billion ($85.5 billion U.S. at the current exchange rate) in innovation and technology projects, primarily in Germany, within five years as it eyes becoming the world's leading automaker.
The German automaker announced on Friday that much of its investment between 2012 and 2016 will focus on the development of eco-friendly vehicles, including hybrid, diesel and electric automobiles. Additionally, VW says investments will be made to extend its development of innovative drive systems and to modernize production. The German automaker also says wind, solar and other renewable energy sources will be used to power several of its factories.

Of the $85.5 billion, VW says 57 percent ($48.7 billion) will be spent in Germany and will focus on alternative drives, next-generation diesel and gasoline engines and direct-shift gearboxes.
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Volkswagen Group to invest more than €62 billion up to 2016

Largest-ever investment package in the Group's history for new models, environmentally friendly technologies and production facilities
CEO Winterkorn: "Volkswagen Group is continuing to extend its innovation and technology leadership."

Wolfsburg, 16 September 2011 - The Volkswagen Group will invest around €62.4 billion in its Automotive Division in the coming five years. This is the result of the Group's investment planning for 2012 to 2016 discussed by the Supervisory Board on Friday. "The Volkswagen Group is investing a record amount in forward-looking projects to achieve its goal of becoming the world's best automobile manufacturer in economic and ecological terms", said Prof. Dr. Martin Winterkorn, CEO of Volkswagen Aktiengesellschaft, adding: "We shall continue to extend our innovation and technology leadership. Top of the agenda for us are investments in environmentally friendly, sustainable models and drives."

Investments in property, plant and equipment will account for €49.8 billion. More than half of this (57 percent) will be invested in Germany alone. According to Winterkorn, the Volkswagen Group with its high level of domestic investments offers the best possible proof of Germany's international competitiveness as a leading manufacturing location. "And this will continue to be the case in future", he said.

The ratio of capital expenditure to sales revenue will be at a competitive level of around six percent on average in the period from 2012 to 2016.

Besides investments in property, plant and equipment, the total amount also includes additions to capitalized development costs of €11.6 billion and investments in financial assets of €1.0 billion net of proceeds from asset disposals. Volkswagen is laying the foundations for profitable, sustainable growth by building new production facilities, introducing new models and developing alternative drives, as well as with its modular toolkits.

Group Works Council Chairman Bernd Osterloh commented as follows: "Volkswagen's investment package is yet another move designed to ensure the Group is fit for the future and takes the form of high-quality investments in new, innovative products, manufacturing processes and our global locations. This safeguards jobs for the long term." He also said that the planning round is proof of Volkswagen's commitment to its home country of Germany. For example, roughly €100 million will be invested in significantly improving the flexibility in the body and white production area of the Wolfsburg plant. The same applies to body and white production at Emden. "The investments in the Wolfsburg and Emden locations safeguard operations at the Emden – Wolfsburg – Zwickau turntable. In future, flexible manufacturing of different volumes and products will be possible at these locations, reflecting market requirements. This represents a major contribution to ensuring these three locations are fit for the future", Osterloh said. In addition, the investments in the German locations will focus on alternative drives, new generations of diesel and petrol engines, and new generations of Volkswagen's innovative direct shift gearboxes.

At €32.7 billion (roughly 66 percent), the Group will spend a large proportion of the total amount to be invested in property, plant and equipment in the Automotive Division on modernizing and extending the product range for all its brands. The main focus will be on new vehicles and successor models in almost all vehicle classes, which will be based on the modular toolkit technology and related components. This will allow the Volkswagen Group to systematically continue its model rollout with a view to tapping new markets and segments. In the area of powertrain production, new generations of engines will be launched offering additional enhancements to performance, fuel consumption and emission levels. In particular, the Group will continue to press ahead with the development of hybrid and electric engines.

In addition, the Company will make cross-product investments of €17.1 billion over the next five years. Due to the high quality targets and the continuous improvement of production processes, the new products also require changes to, and additional capacity in, the press shops, paintshops and assembly facilities. Investments outside production are mainly planned for the areas of development, quality assurance, sales, genuine parts supply and information technology.

Investment activities will also include expenditure on wind, solar and hydroelectric power, in order to supply the factories with renewable energies.

The plans are based on the Volkswagen Group's current structures and hence already take into account the consolidation of Porsche Holding Salzburg.

The joint ventures in China are not consolidated and are therefore also not included in the above figures. These companies will invest a total of €14.0 billion in new production facilities and products in the period from 2012 to 2016. These investments will be financed using the joint ventures' own funds.

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