VW CEO Winterkorn wants to cut costs, boost profit

Volkswagen Group CEO Martin Winterkorn wants to cut costs and boost profits further as part of its mission to rise to the top of the automotive world by 2018 with global vehicle sales of more than 10 million units and a profit margin of more than 8 percent.

"We are not just increasing volume but cost effectiveness as well," Winterkorn told Automotive News Europe. He added, capital investments should not exceed the current 6 percent share of revenue and the share for research and development should not exceed the current figure of 4 percent. "We are completely on track on both figures," Winterkorn said.

Modular makes a big difference

A key to reaching the financial goals will be maximizing VW Group's modular car-production system.

"You are no longer competitive in the auto industry without such a strategy. Our modular approach reduces costs, production and development time and makes possible an even greater variety of models and technologies," Winterkorn said. "For example, the modular transverse platform reduces one-time and unit costs by 20 percent. The production time per vehicle decreases by about 30 percent, to say nothing of the significant reductions in weight and emissions."

Big investment

Winterkorn's statements to Automotive News Europe preceded an announcement Friday that Europe's largest automaker would invest 62.4 billion euros ($86.1 billion) over the next five years on plants, vehicles and r&d. The carmaker's Chinese joint ventures will invest an additional 14 billion euros through 2016.

Previously, VW Group planned to invest a combined 61.6 billion euros in the five-year period ending in 2015 (51.6 billion euros outside China and 10 billion euros in China).

When it comes to profitability, Winterkorn often reminds his top managers that while VW Group ranks in the top three in global sales, it was No. 7 last year in profit margin among automakers. The margin was 5.5 percent in the first half of 2011.