VW to Launch New Phase of Cost-Cutting

Washington DC June 7, 2005; The AIADA newsletter reported that “Volkswagen plans another multi-billion-euro cost-cutting program in 2006 to 2008 to help offset sagging car markets and rampant price wars, its chief executive told the Frankfurter Allgemeine Zeitung on Monday,” reports Reuters. "By November this year, we will decide on a budget plan for the next three years including 2008," Pischetsrieder said in the interview, to be published on Tuesday.

"By 2008, more than 4 billion euros ($4.91 billion) in measures aimed at improving earnings could be necessary again," he continued, adding that this did not include just cost-cutting measures.” Already for 2005, Volkswagen plans to save 3.1 billion euros as a result of cost-cutting measures; Pischetsrieder added that VW aims to save over 1 billion euros more in material and labor costs in 2006 alone. The CEO says cuts are necessary to help the automaker reach its forecast of higher operating and pretax profit this year before and after special effects.

More from Reuters: “Pischetsrieder also said the core VW brand would return to the black this year after suffering an operating loss of 200 million to 300 million euros in 2004. Nonetheless, when asked whether the 9 percent return on capital target for the core automobile division could be reached in 2006, Pischetsrieder replied: "No, that is unrealistic."”