Volkswagen Group has announced its intention to redirect the savings made after the bundling together of its formerly fragmented parts division came into effect on 1 January 2019. The company will measure itself against leading suppliers in the automotive industry, according to VW purchasing chief and former ZF Friedrichshafen CEO Stefan Sommer, who was made the company's board member with responsibility for procurement.
VW components bosses, Sommer, left, and Schmall
VW components bosses, Sommer, left, and Schmall. Credit: Volkswagen Group
The reorganisation of VW's components operations came as part of a plan to invest €3.8 billion on electric vehicle parts by 2023.
The in-house business is spread across 61 factories globally and employs around 80,000 people. It supplies components such as gearboxes, engines, steering systems, seats and electric drive systems. According to its head, Thomas Schmall, the overall business volume amounts to some €35 billion and creates about €22 billion in revenue every year, making it one of the largest vehicle component manufacturers in the world.
Schmall added that VW has targeted a return on sales of around 6% for the components division and more key figures may be published in the near future.
VW said a 2016 labour pact has reached cost savings of €750 million and is set to widen to €2 billion by 2025.
The company will also cut a further 6,000 jobs by 2023 after removing 1,900 since 2016 through voluntary measures like early retirement, Schmall added.
The overhaul, according to Sommer, was made in order to tackle a wider industry shift towards battery-powered vehicles and it includes the fading out of operations with weaker prospects in the future.
The phasing out of production of parts like heat exchangers frees up funds for new projects, such as that in Hanover, Germany where there is a plans to finish the building of mobile charging stations in 2020.
VW also plans to form partnerships with other components manufacturers to generate economies of scale. Sommer said that the automaker is holding "intensive talks" over the possible production of battery cells for e-cars, a project that requires a large scale investment.
Volkswagen's move to consolidate its parts business into a single unit comes in the wake of similar moves by competitors. However, unlike General Motors or Toyota, for example, VW has no plans to create a partial or total spin-off of the business, Sommer added.
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