Restructuring Programme Prepared for Volkswagen

Text from Volkswagen AG.
WOLFSBURG, Germany - The Volkswagen Group successfully completed its ForMotion efficiency programme in 2005, achieving an improvement of € 3.5 billion in its result.

Thanks to ForMotion, the Group was able to counteract the negative earnings impact caused by market conditions. However, as a result of the extremely tense economic situation, the Volkswagen Brand still only records a very slight profit. Dr. Bernd Pischetsrieder, Chairman of the Board of Management of Volkswagen AG: "In particular, the export capability of the German VW plants is not ensured. We continue to incur significant losses on cars exported from Germany to the USA. In order to ensure a secure long term future for the Group, we must act rapidly and determinedly to eliminate the problems that we face."

In this context, comprehensive internal and external competitive comparisons have been conducted. The results are outlined below:

• As regards productivity, it was found that Volkswagen still had a significant disadvantage on an international basis (related to products, procedures and processes).

• In comparison with our best German plants, the traditional German Volkswagen plants still record very high losses;

• In some cases, the component plants are operating economically; others are far from reaching this target.

In view of the loss-making situation of the traditional German plants and intensifying competition in European and global automobile markets, the Board of Management of Volkswagen AG has decided on a thorough restructuring programme for the Volkswagen AG.

Pischetsrieder: "Our restructuring programme focuses precisely on the key problems we have identified. Rapid, determined action is called for in this area."

The key objectives of the restructuring programme are:

• the elimination of productivity deficits, especially at the vehicle assembly plants;

• full capacity deployment at the plants, including capacity adjustments where necessary;

• more competitive personnel expenses;

• a reorganisation of component production.

Over the next three years, up to 20,000 employees directly and indirectly involved in the activities of the Volkswagen Passenger Car Brand could be affected by the restructuring programme.

The methods to be used for achieving and implementing productivity and structural improvements have not yet been defined and will be a matter for negotiation. The Board of Management of Volkswagen AG stands by the collective agreement of November 2004. The target is to ensure the competitiveness of the Group and its employees. This is not possible with the current conditions. For this reason, Volkswagen aims to conduct negotiations with the Works Council and the IG Metall trade union rapidly with a view to finding the best way of reaching these two targets.