Volkswagen To 'Significantly Step-Up' U.S. Presence As Part Of Turnaround

Volkswagen (VLKAY)  said Tuesday that it will step-up its presence in the U.S. as part of its turnaround strategy, targeting a leadership position in the production of SUVs and Limousines.

The world's biggest automaker by unit sales is also set to invest heavily in infrastructure required to operate electric cars on a large scale, in time for its planned roll-out of the vehicles in the U.S. in the year 2021, according to VW brand CEO Herbert Diess.

"We will be significantly stepping up our activities in the USA...In those segments, we will be strongly expanding our range," the Diess said in a statement Tuesday.

In addition, the Wolfsburg-based firm will attempt to consolidate its position in China, as it seek to recover from the $14.8 billion hit it took over the Sept. 2015 emissions scandal.

The group already claims to be the volume-leader in China but expects that it can grow further by rolling out SUV cars across the Asian nation.

Over the longer term VW aims to become the dominant manufacturer of electric vehicles for the mass-market. It has an internal target is to sell 1 million electric vehicles per year by 2025 and to earn €1 billion from Internet-of-Things technology.

As much as being an effort at rejuvenation in the wake of the emissions scandal, the turnaround strategy is designed to help push VW ahead in digital-connectivity and electric engine technology - thus giving it an edge and leadership in tomorrow's auto market.

Some 30,000 jobs will go at Volkswagen over the next 9 years as a result of the restructuring, although these will be voluntary redundancies, early retirement and attrition.

Diess told investors Tuesday that returns would be boosted by the group's turnaround efforts as a more disciplined approach to future investment is a key part of the plan, with VW's capex ratio set to fall and remain below 6% from here onward.

Stricter capex will help drive an improvement in returns and accordingly, Diess said that VW operating margins are forecast to rise from the current level of 2% to around 4% by the year 2020. The margin will rise to 6% by the year 2025, the executive added.

Volkswagen topped the league table of German auto manufacturers for third quarter results this year, when it reported 4.4% growth in sales volumes and beat the consensus for profit-before-tax by 19%. 

But the industry titan has seen its market share crimped throughout Europe, its largest market, during 2016 as buyers shun the core Volkswagen brand following the emissions rigging scandal. 

It also faces a resurgent threat from U.S. regulators after it was reported in November that authorities are now investigating the group's Audi brand over a separate emissions cheating device, initially discovered by the California Air Resources Board. Volkswagen hasn't officially commented on the press reports. 

Volkswagen stock rose 0.5% to €130.52 by 13:00 CET in Frankfurt, trimming the the year-to-date decline to around 10%.

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