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VW’s CEO, shifts strategy from empire-building efficiency

FRANKFURT (Reuters) – Volkswagen’s (VOWG_p.DE is to move away from the decades-old obsession with empire-building and no-expense-spared engineering, in order to free up resources for the development and mass production of electric cars, chief executive, Herbert Diess, told Reuters.

FILE PICTURE: Herbert Diess, will become the CEO of the German car maker, Volkswagen AG, one of the signs in the front side of the ID.3 is a pre-production prototype at the launch of Volkswagen’s new electric car, the eve of the International motor show in Frankfurt, IAA, in Frankfurt, Germany on the 9th of September 2019. REUTERS/Ralph Orlowski

A global clampdown on toxic exhaust emissions, has led to a new wave of consolidation in the auto industry, as car manufacturers search for ways to slash development costs for low-emission, self-driving technology.

While rivals such as FiatChrysler, and Renault, to explore, from $35 billion to bulk up, Volkswagen, is taking the opposite approach-cutting.

“We don’t need any more brands. With very few exceptions, we can tap the world is a big profit market segments with our brands,” Chief Executive Herbert Diess told Reuters at the Frankfurt auto show.

VW is spending € 80 billion ($88.55 million) to buy the battery cells, and the development of the electric vehicle, and struck a broad alliance with Ford, the split of development and production costs.

Volkswagen has grown into a multi-brand empire, under the leadership of Ferdinand Piech, the company’s chief executive and chairman from 1993 until 2015, one of which is the aggressive expansion has resulted in the acquisitions of Bentley, Bugatti and Lamborghini, in a single year.

Today, the German company has 660,000 staff and the owner’s for Seat, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Audi, brands in addition to Scania, MAN and VW’s.

AN EYE ON THE COST

Piech, who passed away last month, and was proud of it, the stress of engineering brilliance, for wage earners, a culture that has caused VW’s profitability, is behind rivals such as Toyota and Peugeot.

Diess told Reuters that it is making the best of a product, without the consideration of cost is a dangerous strategy in today’s world, given the task of overhauling of the engine at the same time, as well as the development of new technologies.

“The product is the experience it should have been. However, you will need to keep an eye on the cost. You can get the company to focus only on the product,” Diess told Reuters.

“There have been a number of examples where this has failed. Take a look at the Borgward, and she was, by far, the best products, but they’re all gone,” Diess said, referring to the company that created the popular cars in the 1950’s. Borgward’s bankruptcy in 1961, and was given new life by Chinese investors in the year 2015.

This week, the European automotive leaders have warned that there will be a new emissions clampdown is a threat to the jobs and the profits, after the European Union forced car manufacturers to slash carbon dioxide emissions by 37.5% between 2021 and 2030. This is in addition to a 40% reduction in emissions between 2007 and 2021.

Frank Witter, the chief executive officer (ceo), has said that he wants to raise profitability, and to help with the shoulder of the emissions clampdown by cutting, rather than bulking up, the car and truck maker.

“The complexity is too limiting, are given in terms of the overall structure of the group,” Witter said in a recent interview at the company headquarters in Germany.

“In the past, the strategy has been reduced to 10 million in the retail sector, and it is catching up to Toyota,” Witter said. Last year, Volkswagen sold 6.2 million cars.

Slideshow (2 Images)

VW started it with the removal of Piech’s empire, and the sale of certain assets, including the transmission and the bearings from the manufacturer, Renk, MAN Power Solutions, and a list of truck maker, Traton earlier this year.

There was still the assessment of the assets and products in a drive to increase profits, become more white, told Reuters.

“There are other things we can think of, but I will continue to refrain from speculation, because it makes it a little more difficult.”

Reporting by Edward Taylor, Jan Schwartz and Joe White, Editing by Louise Heavens

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