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Volkswagen has announced plans for a massive post-dieselgate shake up of its entire corporate structure. The plans, called Transform 2025+, claims that it will bring clearer focus to the way Volkswagen's various brands operate in different segments, as well as triggering enormous investments in electric car technology and connected car systems.
The Chairman of the Volkswagen brand Board of Management, Dr Herbert Diess, said in Wolfsburg: "Our goals are high and our strategy is very ambitious. We want to benefit from change and to take Volkswagen into the lead in the new automobile industry with determination. Over the next few years, Volkswagen will change radically. Very few things will stay as they are. In the final resort, the new strategy is a major transformation program."
However, the programme will come at a significant cost and the early word is that Volkswagen will be looking to shed as many as 30,000 jobs worldwide, something that it will have a difficult time negotiating with its various unions, as well as with the politicians of the state of Lower Saxony, which has significant places on the Volkswagen board.
The plan will, says Volkswagen, be implemented in three stages. In the first, "up to 2020, the brand will be entirely restructuring its core business and completing a transformation along the entire value stream. At the same time, the company will develop new competences." This seems to translate as Volkswagen looking more to outside suppliers for components that are currently made in-house, as well as redirecting its R&D efforts more towards electric cars.
That leads into phase two, in which "Volkswagen intends to take the lead in e-mobility on the basis of its regained strength as a leading, profitable volume manufacturer. The strategy in this phase aims to create a broader earnings base, for example through new mobility services." The third and final phase is a slightly hazier idea of a post-2025 period in which Volkswagen expects to consolidate a lead in electric cars and vehicle connectivity. It's also not clear whether those 30,000 expected redundancies would come in stages, or whether Volkswagen might seek to delay them as long as possible to try and leave itself negotiating room.
In the meantime, the German giant plans to expand sales volume in China and Europe, and to dramatically increase its sales in the US. The first keystone in that US expansion was laid last week at the Los Angeles motor show with the unveiling of the American-centric seven-seat Terramont SUV, a car for which Volkswagen's dealers have been clamouring for close to a decade. "We will be significantly stepping up our activities in the USA. The main focus will be on the key segments in the country, large SUVs and limousines. In those segments, we will be strongly expanding our range. In a second stage, we will then take our new electric cars to North America. Over the next few years, we will be making considerable investments in electric infrastructure" said Diess.
Diess also said that the investment in battery cars would be crucial to Volkswagen as buyers become jaded with diesel and petrol models. "From 2020, we will be launching our major e-mobility offensive. As a volume manufacturer, we intend to play a key role in the breakthrough of the electric car. We are not aiming for niche products but for the heart of the automobile market. By 2025, we want to sell a million electric cars per year and to be the world market leader in e-mobility. Our future electric cars will be the new trademark of Volkswagen," said the brand CEO.
Volkswagen will be looking to trim what it calls "certain low-volume, low-earnings conventional models and model variants." That means likely no new Scirocco coupe, no Bentley Speed Six (or at least a delay to that project) and no mid-size SEAT saloon. Bugatti will probably not be making a third car any time soon, unless the new Chiron can show itself capable of making a profit. Audi's model range is likely pretty safe but Porsche may not get the Panamera-based 928 successor that it craves. Motorsport programmes are already feeling the axe fall - Volkswagen has already pulled out of the World Rally Championship, while Audi has withdrawn from the World Endurance Championship and Le Mans. Audi's commitment to the DTM German touring car series is also looking shaky, although Ingolstadt will enter a works team in all-electric Formula-E next year as it looks to relaign its brand image away from diesel and towards electric vehicles.
Volkswagen has said that, through this period it intends to keep its investment in new models and R&D pretty much the same at around €4.5-billion annually, which suggests that cuts in other areas will be needed to pay the expected legal and governmental costs of Dieselgate, although the plan does call for profitability of the Volkswagen brand itself to double, from two per cent at the moment to four per cent by 2020 and increase by 50 per cent again to six per cent by 2025.
According to Diess, "the strategic offensive is to be supported by a comprehensive organisational reform. The reorganisation will aim for agility, a stronger entrepreneurial spirit, a more transparent discussion culture, flatter hierarchies and more flexible working models. This will be backed by a new corporate mission - with specific goals as regards earnings power, sustainability and attractiveness as an employe - as well as a new leadership model and a broad-based integrity campaign."
Dieselgate is already more than a year old, but its impact on the Volkswagen Group continues to grow, and this new plan indicates that, in nine years' time, the ripples will still be felt.