VW to invest $42 billion over next three years

VOLKSWAGEN will invest around €25.8 billion ($A41.95b) in its automotive operations over the next three years, including €19.9 billion ($A32.35b) in capital expenditure – most on modernising and expanding its model range – and a further €6.6 billion ($A10.7b) on ‘cross-product’ technologies.

The announcement came last week as the European auto giant took another step closer to merging with Porsche, with the boards of both companies approving contracts that should enable VW to take a 49.9 per cent stake in the sportscar marque next month ahead of a full merger in 2011.

Volkswagen also revealed last week that it would establish a new-car manufacturing subsidiary that will produce a new model – believed to be the redesigned Eos or Golf Cabrio – from 2011 at the former Karmann plant in Osnabrueck, Germany.

VW has agreed to buy the land, machinery and equipment that belonged to the financially troubled coachbuilder and convertible-roof specialist, creating more than 1000 jobs by 2014.

The Karmann move is indicative of Volkswagen’s investment planning from 2010 to 2012, during which half of its capital expenditure – some €10 billion ($A16.25b) – will be sunk into its German home market.

Left: VW EOS.

Most of the overall capital expenditure – €13.3 billion ($A21.6b) – will be directed into product, including all-new models, successor models and model variants in almost all vehicle classes, based on VW’s “multi-brand modular matrix strategy”.

Over the period, the ratio of capital expenditure to sales revenue is expected to average around six per cent, which VW described as “a competitive level”.

“With this approach, the Volkswagen Group is systematically extending its new model initiative to move into new markets and segments,” VW said in a statement.

“In the area of powertrains, new engine generations will be introduced that offer additional improvements in performance, consumption and emissions. Automatic gearbox capacity will be aligned with growing demand.”

The so-called cross-product technologies are still to be specified, but the vehicles concerned will require modifications to several manufacturing faciliites.

“Because of the high quality and cost targets, the new products require modifications to press and paint shops as well as assembly facilities,” the company said. “Outside manufacturing, investments are planned mainly in the areas of development, quality assurance, genuine parts supply and IT.”

A new production plant is being built in North America and will start operating in 2011, and new facilities are being ramped in Russia and India.

Another €5.9 billion ($A9.6b) is set down for capitalised development costs, which refers to research and development dollars that must be accounted for as an asset and depreciated over time.

The €25.8 billion total does not include (unconsolidated) joint-venture companies in China, which will invest a further €4.4 billion ($A7.15b) from 2010-2012.

Volkswagen AG chief executive Martin Winterkorn said: “The Volkswagen Group is vigorously driving forward its long-term growth strategy by investing in environmentally friendly models, innovative technologies and new plants.

“We are continuing to make focused investments in our future.”

In other recent Volkswagen news, the German auto giant last week announced its upcoming Amarok utility will be the official support vehicle for the 2010 Dakar Rally, to be held in Chile and Argentina - where the new dual-cab will be built - between January 1 and 17.

Volkswagen's first twin-cab ute will go on sale first in South America after the Dakar race, before arriving in Australia - which is forecast to be the world's fourth best-selling market - around mid-2010.

As part of the 35-vehicle deal, in which Volkswagen Commercial Vehicles will be the 2010 event's official vehicle supplier and partner to rally organiser Amaury Sport Organisation, ASO will enlist the services of 20 Amaroks - four of them fitted with "additional off-road conversions" - with a further 15 to be assigned to press and shuttle duties.

Most Amaroks will traverse the same 9000km of gruelling South American terrain as the four Race Touareg entries officially backed by Volkswagen Motorsport.

Watch out for GoAuto's first drive of the all-new Amarok in December.