Investment- and financial planning
INVESTMENT- AND FINANCIAL PLANNING 2014 to 2018 IN THE AUTOMOTIVE DIVISION
Based on our current planning, we shall invest a total of €84.2 billion in the Automotive Division in the period from 2014 to 2018. Investments in property, plant and equipment will account for €63.4 billion, more than half of which (roughly 60%) will be in Germany alone. The ratio of investments in property, plant and equipment (capex) to sales revenue in the period from 2014 to 2018 will be at a competitive level of 6 – 7%. Besides investments in property, plant and equipment, investing activities will include additions of €19.5 billion to capitalized development costs. By investing in new facilities and models, as well as by developing alternative drives and modular toolkits, Volkswagen is laying the foundations for profitable, sustainable growth. These investments also include commitments arising from decisions taken in previous fiscal years.
At €41.2 billion (roughly 65%), the lion’s share of the total amount to be invested in property, plant and equipment in the Automotive Division will be spent on modernizing and extending the product range for our brands.
Among other things, the high level of investment results from upfront expenditures in connection with the Euro 6 emission standard, which necessitates extensive upgrading of the vehicle and engine portfolio. The main focus will be on new vehicles and successor models in almost all vehicle classes, which will be based on the modular toolkit technology and the related components. This will allow us to systematically continue our model rollout with a view to tapping new markets and segments. In the area of drivetrain production, we will launch new generations of engines offering improved performance and lower fuel consumption and emission levels, focusing for example on hybrid and electric motors.
In addition, Volkswagen will make cross-product investments of €22.2 billion over the next five years; this includes investments to expand capacity. As a result of our high quality targets and our commitment to continuous improvement of our production processes, investments in our press shops and paintshops are also necessary. Non-production-related investments are mainly planned for the areas of development, quality assurance, sales, genuine parts supply and information technology.
We endeavor to finance our investments in the Automotive Division using internally generated funds and expect cash flows from operating activities to amount to €115.8 billion over the 2014 to 2018 planning period. This means that the funds generated are expected to exceed the Automotive Division’s investment requirements by €31.6 billion, further improving our liquidity position. We expect net cash flow in the Automotive Division to be moderately lower in 2014 than in the prior year, but it will nevertheless make a significant contribution to strengthening the Group’s financial position.
These plans are based on the Volkswagen Group’s current structures. They do not take into account the possible settlement payable to other shareholders associated with the control and profit and loss transfer agreement with MAN SE. Our joint ventures in China are not consolidated and are therefore also not included in the above figures. These joint ventures will invest a total of €18.2 billion in new production facilities and products in the period from 2014 to 2018 and will finance these investments from the companies’ own funds.
We are planning to invest €2.6 billion in the Financial Services Division from 2014 to 2018. We expect the growth in leasing and rental assets and in receivables from leasing, customer and dealer financing to lead to funds tied up in working capital of €81.8 billion. Roughly 43% of the total capital requirements of €84.5 billion will be financed from gross cash flow. As is common in the sector, the remaining funds needed will be met primarily through established money and capital market debt issuance programs and customer deposits from the direct banking business.