VW Group (Part 1): Reorganizing operations into 7 business units
Delay in change to WLTP emissions test in Europe; Offering incentives for diesel vehicle buyers
VW Group’s diesel scandal was revealed in the U.S. in September 2015. Matthias Müller, who assumed the role of CEO for the Group after the diesel scandal, reorganized the company to regain consumers’ credibility and restore its performance above the levels prior to the diesel controversy. However, the Group’s Supervisory Board and major shareholders dismissed him due to inadequate drastic reforms, appointing Herbert Diess as his successor in April 2018. CEO Diess implemented a significant restructuring of the VW Group’s organization in July 2018. He consolidated 12 automotive brands into four business units and will spin off its truck and bus division as well as its components unit. The Group is expected to become more efficient and capable by promoting quicker decision-making.
The VW Group changed the name of its commercial vehicle division from VW Truck & Bus AG to TRATON AG in August 2018. The Group will spin off the unit through an IPO by the end of 2018. As a result, the parent company will be able to focus on its core businesses and introduce new technologies and services more quickly. At the same time, its truck and bus unit can be more active as an independent company in raising funds and exploring alliances with other companies. TRATON AG and Hino Motors agreed to enter a strategic alliance, beginning with the formation of a joint venture to develop electrification technologies and share procurement resources.
In Europe, the new WLTP emissions test was introduced for all new car registrations from September 2018. WLTP measures fuel consumption during driving tests designed to represent real world vehicle operating conditions. VW is facing delivery bottlenecks for some models due to a lack of qualified staff for WLTP testing. This is because the emissions testing staff at VW is busy reevaluating an enormous amount of data relating to the diesel engines affected by scandal.
In June 2018, VW took a major step toward overcoming the diesel scandal by paying the fine of EUR 1 billion that was mandated by the German public prosecutor. In Europe, the demand for diesel vehicles has been decreasing following the emissions scandal and several German cities which suffer from severe air pollution have banned the driving of diesel vehicles in those cities. The government of Germany unveiled measures in October 2018 requiring automakers to replace and/or repair EU1 to EU5 diesel vehicles to improve air quality and halt the decline in the demand for diesel vehicles, while requiring automakers to bear the associated costs. To support the government’s efforts, VW will offer incentives to replace older diesel vehicles.
VW Group retained the title of the world’s largest carmaker in 2017 with a record global sales volume of 10.78 million units. The Group’s sales revenue also hit a record high at EUR 230.7 billion and operating profit doubled to EUR 13.8 billion. Regarding VW’s outlook for 2018, the Group’s deliveries are forecast to moderately exceed prior-year figures. Its sales revenue is expected to increase by up to 5% year-over-year, and operating return on sales is projected to be between 6.5% to 7.5% (compared to 7.4% in 2017).
The VW Group’s new model launch plan, electrification strategy, autonomous driving technology, mobility services and activities in China will be reported in the sequel to this report, entitled “VW Group (Part 2)”.
2021-2030 CO2 regulations in Europe, backlash against diesel, and electrification（May 2018）
VW Group (Part 2): implementing new "Together - Strategy 2025" plan（Jul. 2017）
VW Group (Part 1): 2017 sales revenue to increase by up to 4%（Jun. 2017）