VW invests $86.1 billion in bid for No. 1

VW invests $86.1 billion in bid for No. 1

September 17th, 2011 by By Bloomberg News in Business Around the Region

Volkswagen AG will invest a record $86.1 billion over the next five years to underpin its goal of becoming the world's largest carmaker.

The supervisory board for VW voted Friday to approve the spending on plants, vehicles and research and development for the carmaker's nine brands, the Wolfsburg, Germany-based company said in a statement.

VW is expanding in China, its largest market, as part of a broader plan to leapfrog Toyota Motor Corp. and General Motors Co. and become the world's biggest carmaker by 2018. The effort hit two roadblocks in the past week as a merger with Porsche SE planned for this year was delayed and Suzuki Motor Corp. said it wants to dissolve its 20-month-old alliance.

"VW has its sights firmly pegged on future growth," said Stefan Bratzel, director of the Center of Automotive Management in Bergisch-Gladbach, Germany. "They're broadening their presence in lucrative markets like China and Latin America and optimizing spending on future technologies. After the latest setbacks, the message is VW is more determined than ever."

VW Chief Executive Officer Martin Winterkorn said this week that the German manufacturer, which operates 62 factories globally, is mulling additional plants in China. VW has already announced plans to add two more Chinese production facilities, bringing its total to 11. VW plans to expand the number of factories it has worldwide to about 70, spokesman Marco Dalan said Friday.

VW began vehicle production at its $1 billion plant in Chattanooga in April to supply the U.S. with a midsized sedan specifically developed for the world's second-largest car market. Volkswagen is also expanding capacity in Russia.

Capital expenditures over the five-year period will be around 6 percent of revenue, VW said. More than half the money spent on property, plants and equipment will be in Germany.