Volkswagen preaches stock market mindset to hit new financial goals
2023.06.21 11:54
© Reuters. Visitors walk past the Volkswagen booth at the Auto Shanghai show, in Shanghai, China April 18, 2023. REUTERS/Aly Song
By Victoria Waldersee and Jan Schwartz
BERLIN (Reuters) -Volkswagen is setting financial targets for each of its brands, cracking down on fixed costs and betting on improved productivity to boost its margins in the face of a sagging stock market performance and growing competition for market share.
In a press call ahead of its Capital Markets Day presentation on Wednesday, executives were keen to emphasise the measures planned were not pure cost-cutting programmes but rather ways to make the carmaker operate more efficiently.
Volkswagen (ETR:), which saw 1.1-1.2% revenue growth per year in the last two years, is now aiming for 5-7% annual growth by 2027 and 9-11% returns by 2030 – up from 8.1% last year.
“Cost-cutting is one part, but it is much more than this. We are talking about performance programmes where we start to improve our efficiency… we are starting in all brands with the same method, but with a specific approach for each brand,” Chief Executive Oliver Blume said on the call.
Germany’s top carmaker has come under rising pressure from investors to provide clarity on how it will protect its market share in the face of a growing number of Chinese competitors, such as BYD, and Tesla (NASDAQ:).
“We need to change at a massive speed to remain competitive long-term,” Blume acknowledged in conversation with analysts.
DISCIPLINED
“If you look at how Volkswagen operated in the past, often we had a fixed cost growth and we wanted to outgrow that fixed cost,” Chief Financial Officer Arno Antlitz said.
“We are convinced in the transformation we need to change that strategy to our value over volume approach, be very disciplined on fixed cost, be very disciplined on investment and rather focus on value,” he added.
Under the new performance programmes, each brand will have a set target for operating result, returns, net cash flow, cash conversion rate, and investment ratio.
The carmaker is planning separate capital markets days for each brand over the coming months to introduce those targets, sources close to the company told Reuters last Friday.
Its VW passenger car brand announced last week a target of 10 billion euros ($11 billion) in efficiency gains by 2026, without providing detail on how it would be achieved.
($1 = 0.9133 euros)
