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Volkswagen investing billions of Euros to achieve number one status faster

Posted Dec 1st 2012 8:59AM

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When it comes to spending money, Volkswagen, as the No Fear shirts used to say, "Ain't skeered." Europe is reportedly headed for a 17-year low in annual car sales, VW share is down 0.6 per cent on The Continent and manufacturing overcapacity is estimated to be around 30 per cent industry-wide. That is making the ability to accurately predict Europe's future less easy by the day, so VW's solution is to shorten the timeline and spend more money. Last year the German company said it would invest US$83.2 billion in the five years from 2012 to 2016; both Reuters and Bloomberg now report that the group will invest US$64.7 billion in the three years from 2013 to 2015.

Last year's plan was to spend US$16.7 billion per year, this year's plan means spending US$21.7 billion per year. Barring a new announcement, that amount would equal the three-year investment that analysts expect from Toyota and General Motors, combined. Those other two companies also happen to be the ones above Volkswagen on the global sales chart, which the company's Strategy 2018 wants to change. The amounts don't include VW's intention to spend US$12.7 billion on its joint ventures in China.

Reuters says that US$13.7 billion will be put toward new models and "the design of alternative drives," and that two-thirds of the total will go toward making more efficient, green cars. Bloomberg puts that new-model development number at US$32 billion, which includes a new line of trucks for MAN, and says there will be "40 models based on the same framework" as the MkVII Golf alone spread throughout the empire. No matter which way you slice it, it's a lot of money, and all of a sudden items like the Volkswagen XL1, a 1.0-liter Audi city car, a Q8 crossover and an R10 diesel hybrid supercar don't sound so outrageous.

News Source: Reuters, Bloomberg

Image Credit: Copyright 2012 Chris Amos / AOL

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bigfriggindeal

They may become the largest producer but their quality is lagging. They can throw all the money in the world at the goal of being the largest producer, but until their whole lineup has long term reliability and quality that beats Toyota, Honda and Subaru, at the same or better price, then no sale.... who am I kidding... even then I wouldn't buy a volkswagen.

December 02 2012 at 6:41 PM Report abuse rate up rate down Reply
Economist_101

This is what Toyota did in the late 80s and early 90s -- until the Japanese government ran into a recession and could not sustain it any longer.

Basically people can buy a lot of car for a much lower cost. Back then -- Toyota pricing with Lexus quality.

This is outstanding opportunity for consumers, but a major market distorter.

Was it good for Toyota? Well it put their quality and value score way up -- but the enormous costs involved were certainly a widespread reason that the Japanese economy, even to this day, has not recovered to be where it was back then.

December 01 2012 at 12:54 PM Report abuse rate up rate down Reply