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VW Brand CFO Urges Efficiency Boost at German Factories

VW Brand CFO Urges Efficiency Boost at German Factories

(Bloomberg) -- Volkswagen AG’s namesake passenger-car brand is sticking to its financial goals, though the company acknowledged the need to improve productivity in high-cost Germany to remain competitive.

The potential for production efficiency gains mapped out in a labor pact signed three years ago by far exceeds the earmarked 500 million euros ($557 million) for this year, VW said in a statement Thursday. Competition in Europe is set to intensify following the merger of PSA Group and Fiat Chrysler Automobiles NV, a deal that will create the world’s fourth-biggest carmaker.

“There remains -- and one must address this openly -- the area of productivity in the German factories,” VW brand Chief Financial Officer Arno Antlitz told reporters in Wolfsburg, Germany. “Here we must compensate for the high cost of production through progress regarding productivity much more in the future,” he said.

VW Brand CFO Urges Efficiency Boost at German Factories

VW group’s largest division embarked on a deep overhaul in the wake of its diesel-emissions scandal and hammered out a landmark agreement with powerful German unions in 2016 that included a net reduction of 14,000 jobs. In return, VW ruled out forced layoffs in Germany until 2029. At the same time, it added more high-margin SUVs, an area where it lagged behind rivals for years, and streamlined its product range by slashing slow-selling vehicles.

The cutbacks that triggered fierce clashes between VW Chief Executive Officer Herbert Diess and labor leader Bernd Osterloh ultimately gave the manufacturer a head start addressing inevitable cutbacks amid a fundamental technology shift toward electric cars packed with the latest electronic gadgetry. VW sister brand Audi and luxury-car rival Daimler AG followed suit with large-scale job cuts announced in recent weeks.

The VW brand’s operating-profit margin will be within the target range of 4% to 5% this year and next before improving to at least 6% in 2022, Antlitz said. The marque will roll out 34 new or revamped cars next year, including the electric ID. 3 hatchback flanked by an SUV sibling, more hybrid options and a new variant of the Arteon coupe.

The unit expects to defy a 5% decline in the global car market this year with a slight increase in deliveries. It will spend 19 billion euros on future technologies by 2024, with electric cars accounting for 11 billion euros.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Andrew Blackman, Iain Rogers

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