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Volkswagen (VW) plans to mimic the fast-paced rollouts of products made by the likes of Apple to adapt quicker to changing customer demands for technology in its cars.
To accelerate vehicle development, VW is forming a task force that will include 40 to 60 top managers in the coming months, according to internal documents from the Germany-based company. The group will identify the steps needed to change from the industry's traditional approach of revamping models every seven years as technology developments including in-car connectivity and electric motors call for speedier reaction times.
"How can we shorten today's model cycles and make them significantly more flexible?" Chief Executive Martin Winterkorn has said in a speech to managers (and quoted here from a transcript dated July 14). "Consumer electronics with ever-new technologies and products set the pace."
VW's push comes as automakers rapidly absorb new technologies. Consumer attitudes toward cars are also changing, forcing a rethink by automakers.
Adapting to these shifts is part of VW's effort to cut costs and improve productivity at its namesake brand by 5 billion euros ($6.8 billion) by 2017. VW is pushing for savings through lower purchasing and factory expenses and reducing production complexity. It has sought to offset its heavy wage bill by sharing parts and development costs among its 12 brands.
With fierce competition and high costs to roll out fresh models such as the revamped Passat, the VW brand's margin dropped to 1.8 per cent of sales in the first quarter from 2.4 per cent a year ago. The company's target for its biggest nameplate is a 6 per cent margin. Hyundai Motor had a first-quarter operating margin of 9 per cent.
Winterkorn is focusing on profitability with the group's annual sales on track to exceed 10 million vehicles for the first time in 2014, four years earlier than planned. VW is set to introduce 100 new or revamped vehicles through next year as part of a strategy to dethrone Toyota Motor as the global industry leader by 2018.
Boosting profit is vital for VW as far-reaching changes are looming for automakers amid tightening emission regulations and hefty expenses to develop electric cars, Winterkorn has said. "To be able to afford this, we need to create the economic basis now," the CEO has said, according to the transcript. "Without the appropriate financial basis, any strategy will and must fail."
