VW Chief: Adaptability is Key

Washington DC August 24, 2005; The AIADA newsletter reported that during a meeting with analysts in London today, Volkswagen Chief Bernd Pischetsrieder issued a blunt warning to western Europe’s automobile industry as he stressed the need for the industry as a whole to operate at a level of profitability despite currency pressures, reported Reuters.

"If we are not in a position, whether it’s for a fully assembled car or for components, to deliver to diverse markets from Europe then it will be the end of a lot of manufacturing activities, not only for Volkswagen and our suppliers but for our whole industry,"

Pischetsrieder said. "The key problem of the Volkswagen group is that on today’s cost structure and possibly even (given) our performance in the subsidiaries we are not able to make a profit in the States nor to sustain previous levels of profitability in China," he said. VW’s

CFO Hans Dieter Poetsch echoed Pischetsrieder’s concerns, adding that operating and pretax profits for the automaker are expected to improve in 2005, but “very real challenges” continue to face VW heading into the second half of 2005. "The examples are very obvious: the situation in the United States, the situation in China and the significant challenges with regard to the Volkswagen brand, which still is operating in a very unsatisfying situation," Poetsch said.

Pischetsrieder stressed to analysts the need for the automaker to be able to compete in the global marketplace. He discussed the prospects of pay cuts and even job cuts as a way to trim VW’s ballooning manufacturing costs. "We need an improvement on the manufacturing costs not only in Wolfsburg and not only on this car," Pischetsrieder said. "When I say personnel costs this obviously could consist of two elements: either less per head, or less heads, or both.”

On Tuesday, German newspaper Handelsblatt reported that VW was purportedly in talks with fellow German automaker DaimlerChrysler AG on a partnership that would entail joint production of a VW-branded minivan for the U.S. market. The automakers have yet to comment on the report, but citing company sources, Handelsblatt said the VW-branded, DCX-produced minivan would likely be built by Chrysler and available to consumers by 2007.