Volkswagen, Builder Hochtief Form Venture

July 1, 2002 BLOOMBERG NEWS reported that Volkswagen AG formed a joint venture with Hochtief AG, Germany's largest construction firm, to manage some of the carmaker's factories and buildings in an attempt to cut costs.

Europe's largest automaker owns 49 percent of the venture, called Car.e Facility Management GmbH, while Hochtief holds the rest. The unit expects sales of 20 million euros ($19.9 million) next year, rising to 100 million euros by 2007.

Faced with falling car sales, Volkswagen is concentrating on reducing expenses to meet its pledge of matching last year's pretax profit of 4.4 billion euros. The Wolfsburg, Germany-based carmaker couldn't say how much the new unit would save.

"It's difficult to quantify," said Volkswagen Chief Financial Officer Bruno Adelt at a press conference. "But this is an important part of our strategy to reduce costs."

The venture will manage the factory in Dresden where Volkswagen builds the Phaeton luxury car, as well as Autostadt, the car museum and delivery center at the company's headquarters in Wolfsburg. Car.e will also manage some factories for the Bugatti and Audi luxury car divisions.

Essen, Germany-based Hochtief has been shifting focus to building-related services to boost profit. The joint venture will venture will manage the heat, electricity, water, security, maintenance and trash removal for the buildings.

In the first five months of the year, Volkswagen sales fell 5 percent to 2.07 million vehicles. The carmaker's two best-selling models, the Volkswagen Golf and Passat, are older than products from rivals PSA Peugeot Citroen and Ford Motor Co. and are losing customers.