Volkswagen Cutting Costs as Sales Slip

Volkswagen Cutting Costs as Sales Slip

The maker of the iconic Volkswagen bug is increasing its endeavors to cut costs. Volkswagen does this in light of the sinking demand for the Volkswagen passenger vehicle. In Europe, the purchase of new cars is sinking to a twenty-year low.

In the coming months Volkswagen will cut costs in all departments, at all levels, and at every plant, said the company.

According to a Volkswagen statement, Arno Antlitz, the Volkswagen brand board member for accounting and controlling, spoke to over 18,000 company employees during a meeting in Wolfsburg, telling them,

“We need solid earning power and a competitive cost position. “We are able to invest record sums in our future projects in spite of the crisis”

Volkswagen suffered less than most of their peers in the European car industry depression. Thanks in part to their profits from luxury brands Porsche and Audi, and their large presence in China.

Volkswagen’s passenger car division, which has the biggest vehicle sales, fell by thirty-four percent from one year earlier to $2 billion, and group sales declined five percent in the first eight months according to ACEA data. The Volkswagen brand itself fell eight percent in sales.

Germany’s Manager Magazine reported that Volkswagen was in jeopardy of missing their financial goals, which the company denied.

The magazine referred to company informants as saying that MQB (modular production architecture) has higher costs than originally expected and was keeping profit margins at bay.

Volkswagen Cutting Costs  – Profitability targets

Earlier this month Volkswagen stated that boosting the profitability of the Seat brand is uncertain. Increasing sales beyond the European markets and shared technology among its brands are linked to cheaper costs for the company. CFO Hans Dieter Poetsch says Volkswagen forecasts the operating profit margin to increase from 3.5% to more than 6% sales.

The brand Seat, which had an operating loss of 156 million Euros last year, targets a profit margin of 5%. Skoda’s margin is expected to be between 6 and 8 percent. The posting in 2012 was 6.8 percent. No date was mentioned for these goals.