VW to keep investing in bid for world dominance

Thu Nov 22, 2012 9:05am EST
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By Andreas Cremer

BERLIN (Reuters) - Volkswagen (VOWG_p.DE: Quote) is expected to increase planned investment in new vehicles and factories, looking beyond a European slump to its long-term goal to be the world's largest car maker.

While the multi-brand group is less exposed to austerity-hit Europe than rivals PSA Peugeot Citroen (PEUP.PA: Quote) and Fiat FIA.MI, finding the cash to achieve its goal is becoming harder and it has to balance keeping a tight rein on short-term costs with the need to develop new products.

VW's 20-member supervisory board is due to sign off on new spending targets for 2013-17 on Friday.

Wolfsburg-based VW is expected to increase spending by 12 percent to as much as 70 billion euros ($89.73 billion) for its twelve brands over the next five years, compared with 62.4 billion for the 2012-16 period agreed a year ago, analysts said.

That would be a record level, but also represent a slowdown - the spending target was raised 20.9 pct to 62.4 billion euros from 51.6 billion euros for the 2011-15 period.

"Pressure to cut costs is definitely higher in such difficult times, but we must keep up spending to meet our expansion goals," Peter Mosch, top labor leader of VW's Audi division and a member of VW's supervisory board, told Reuters.

By stepping up investments on products and technology, VW could consolidate its lead over stricken Mediterranean peers Peugeot and Fiat, which have slowed or shelved whole vehicle programs, engine technologies and platform revamps while grappling with high fixed costs in a shrinking European market.

VW's strong sales elsewhere have allowed it to offer cut-price deals and swell its share of the battered European market to almost a quarter.   Continued...

Logo of German carmaker Volkswagen, is pictured at the IAA truck show in Hanover, September 18, 2012. REUTERS/Fabian Bimmer