Volkswagen to invest EUR 84 billion on automotive unit

The German group announced Friday that it intends to invest EUR 84.2 billion ($ 113.4 billion$) in its automobile division over the next five years. This is equivalent to 16.8 billion per annum, little changed since the 16.7 billion advertised year last for 2013-2015.

While expenditure to meet the objectives of programming of the group is upwards on predictions last year, investments in property, plant and equipment are about EUR 500 million per year lower, largest manufacturer of Europe, said, pointing to the postponement of some construction projects not specified and better capacity utilization.

Investment in products and technologies will be affected, Volkswagen (VW) said, while its two joint ventures in China - the world's largest automobile market and engine of the recent growth of the group - will continue to invest heavily.

"VW is strengthening the discipline of cost, with greater emphasis on basic product, spending", said analyst M.M. Warburg Marc - Rene Tonn.

Compared to rival European Fiat and PSA Peugeot Citroen, VW has SAG's six years on the well resisted European automobile market, thanks mainly to the luxury brands Porsche and Audi, which represent barely 15% of sales but contributed to two-thirds of the profits so far this year.

But some analysts feared that the gains of market shares of VW in Europe were purchased by updating heavy, and skepticism seeps into whether if a new production platform aims to reduce costs through the Group's brands will deliver the promised benefits.

With costs of this platform, so discounts and a stronger euro, eroding profits, analysts had expected a reduction of costs on projects unrelated to the development of a model.

"In times like these, our disciplined cost and investment management will remain the cornerstones of our business," CEO of VW, Martin Winterkorn said Friday.

CHALLENGES

VW, with 12 brands and 105 factories, has a fleet of about 300 models ranging from budget Skodas and seats, through the VW Golf, the best-selling car of Europe, for buses and trucks carrying the badge MAN and Scania.

However, even with a net cash position of 16.7 billion euros at the end of September and a goal to equal the record of last year earnings from operations, the group is facing a battle to overcome Toyota and General Motors to become the world number one by 2018.

VW finance Chief Hans Dieter Poetsch, said last month that he had expected not a rebound rapidly in the automotive market of Europe, which accounted for almost 40% of sales of vehicles from the Group of 10 months, although sales of automobiles in the region swung reunites with growth in September and October.

The Wolfsburg-based company, which runs to about 60 new and redesigned models this year, also brought a blow last week of news it was recalling more than 2.6 million cars around the world to solve various problems.

Almost 60% of VW expenditures on property, plant and equipment of the auto division will focus on the Germany, he said.

Its Chinese businesses, which are not consolidated, will pass an extension EUR 18.2 billion from 2014 to 2018, he added.

VW shares closed about 0.5 percent lower at 195 euros, in a European flat broad index.

($1 = 0,7429 euros)

(Additional reporting by Maria Sheahan; Edited by Mark Potter)