DRESDEN, Germany (Reuters) - Volkswagen (VOWG_p.DE) Chief Executive Martin Winterkorn has said Europe’s largest carmaker is on course to meet a goal of cutting costs at its core division by 5 billion euros by 2017, as efficiency-boosting steps are taking hold, a source said.
Winterkorn said in July that 5 billion euros ($6 billion) of costs need to be cut at the passenger-car brand, VW’s largest division by deliveries and revenue, where profit margins have been languishing amid a costly proliferation of models.
VW has since been trying to identify measures with staff representatives to boost efficiency across its multi-brand operations.
Winterkorn has said cost-cutting steps may include ceasing non-profitable models such as some convertible cars and weeding out costly vehicle equipment to trim rising R&D spending.
Wolfsburg, Germany-based VW has been reluctant to publish concrete savings measures, merely saying synergies must be raised in areas such as production, procurement and distribution.
“We will definitely meet the target of improving (brand) results by 5 billions euros by 2017,” Winterkorn told VW managers on Thursday at a closed-door strategy conference in Dresden. The remarks were confirmed by a person close to management thinking who attended the event.
Some of the improvements should come through efficiencies and leaner management and include, for example, cutting back management meetings, said the person, who declined to be named because he is not authorised to speak to media.
As VW is poised to meet a long-planned sales target of 10 million vehicles four years early in 2014, top executives are reinforcing steps to boost profitability to fund future expansion and development of battery-powered and hybrid powertrains to lower CO2 emissions.
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Reporting by Andreas Cremer and Jan Schwartz; Writing by Thomas Atkins; Editing by Maria Sheahan and David Evans