Volkswagen to emphasize battery-powered cars

Volkswagen unveils the e-Golf Touch electric car during a keynote address at CES International in Las Vegas in January.
Volkswagen unveils the e-Golf Touch electric car during a keynote address at CES International in Las Vegas in January. AP

As Volkswagen looks to increase its meager profitability in the wake of an extensive emissions scandal, the carmaker announced plans on Thursday to sharply increase the number of battery-powered vehicles it sells while simultaneously cutting costs.

Calling it a transformative strategy, the company’s chief executive, Matthias Mueller, said at a news conference that battery-powered vehicles could account for as much as 25 percent of total sales within a decade. Operating profit would rise to as much as 8 percent of sales by 2025, he said, a modest increase from 6 percent in 2015.

The new plan also appeared to be an attempt to change the conversation from diesel emissions. Volkswagen is in intense talks with lawyers for its U.S. customers about how much it must compensate them for manipulating emissions tests to make its diesels seem cleaner than they were.

“Volkswagen is much more than diesel,” Mueller said.

But Mueller did not give details of how the company will cut costs. Analysts say the company must cut its bloated workforce to operate as efficiently as its main competitors. That is extremely difficult at Volkswagen because of the exceptional power of worker representatives to set company policy.

Because of its high costs, Volkswagen earns almost no money selling cars with the VW badge. Most of its profit comes from the Audi and Porsche luxury car units, which are able to command a higher margin. And profit companywide has been declining, falling 19 percent in the first quarter to 2.4 billion euros, or $2.7 billion.

Even before the emissions scandal, Volkswagen struggled to contain costs that were much higher than those of its rivals. With about 610,000 employees, Volkswagen produces about the same number of vehicles as Toyota, which has 344,000 workers.

But it is a challenge for Volkswagen to reduce its workforce, largely because of the exceptional power of labor representatives: Under a 1960 law in Germany that applies only to Volkswagen, workers can veto plant closings and other changes.

The carmaker’s employees also have a de facto majority on Volkswagen’s supervisory board, which oversees top management. Ten of the 20 members of the board are employee representatives, in accordance with German laws that apply to all companies.