VW Brand CEO Targets 7.5% Productivity Gains in 2017 And 2018

By William BostonFeaturesDow Jones Newswires

Volkswagen AG's (VOW.XE) struggling namesake brand said Friday it expects to wrap up the technical fixes of most tainted diesel vehicles by the end of the year and boost productivity and profits in its main automotive operations.

Herbert Diess, the former BMW executive who runs the VW passenger car brand, however, warned of "significant risks" in the year ahead, citing political uncertainty from Brexit, political upheaval in Turkey and a weakening U.S. auto market.

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"This year, then, cannot be taken for granted," he told reporters at a presentation in Wolfsburg. "It is now crucial that we resolutely stay the course."

The Volkswagen brand published detailed results for the first quarter for the first time, but due to changes in accounting provided no comparative figures for the previous year. The company said the VW brand achieved a pretax profit of EUR900 million and generated sales revenue of EUR19 billion. The company sold 862,000 vehicles in the first three months of the year

Mr. Diess said VW aims to boost productivity 7.5% each year in 2017 and 2018, and an additional 5% a year in the following two years. He pledged "strictest cost discipline" to keep fixed costs stable this year.

Chief Finance Officer Arno Antlitz said the company expected significantly improved earnings through restructuring and cost-cutting in difficult markets, as well as product launches, including 17 new sport-utility vehicles by 2019.

The company said the VW brand is on track to achieve a profit margin at the upper end of its 2.5% to 3.5% range forecast and to boost margins to 4% by 2020 and to 6% by 2025.

The improved outlook at the VW brand, Volkswagen's biggest business by sales, comes as the company is still grappling with its worst-ever crisis, the admission in 2015 that it rigged nearly 11 million diesel-powered vehicles to cheat on emissions tests.

The great majority of those vehicles were produced by the Volkswagen brand. Mr. Diess said two-thirds of the tainted vehicles have been repaired in Germany, and half of the nearly nine million tainted diesels in Europe have been fixed. VW expects to complete the technical fix of all diesel vehicles in Europe and most of the affected vehicles in the U.S by the end of the year, he said.

Write to William Boston at William.Boston@wsj.com

(END) Dow Jones Newswires

May 05, 2017 05:08 ET (09:08 GMT)