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Volkswagen Unveils New Golf As Production Cut Looms

MQB Cost Savings Could Start As Soon As 2013

Volkswagen unveiled the new Golf VII small family car, which will make is world debut at the Paris Car Show later this month, just as reports circulated in Germany that the company would slash overall production 10 per cent in the second half.

VW would cut production by 10 per cent, according to Automobilwoche, and the company later said it had cut internal sales targets for 2012 and by less than the up to 300,000 reported in various newspapers. Der Spiegel said the cut would be 150,000 in the second half, which Deutsche Bank reckoned would be around three to four per cent.

Meanwhile, the new Golf is, unsurprisingly, barely distinguishable from the previous model. VW has sold over 29 million Golfs around the world since it was first introduced in 1974 to replace the iconic Beetle. Golf VII is a bit longer and wider than the old one, and has shed about 220 pounds in weight.

The Golf VII is built on a new engineering platform of engines, suspensions and technology, the so-called MQB platform, which will eventually be used on up to a half of VW’s annual output of more than eight million vehicles.

According to Morgan Stanley, the MQB system will save VW up to €3,000 per vehicle, and the savings will start to hit the bottom line next year.

“The new MQB platform will ultimately carry up to five million units annually, giving VW platform scale and leverage that few can rival. Only Hyundai and Honda come close. We estimate MQB will drive €14 billion in gross cost savings by 2019, equivalent to €3,000 per car. 2013 should already see a material positive swing as launch costs fade and MQB savings kick in,” said Morgan Stanley analyst Stuart Pearson.

Europe weakness
Deutsche Bank said the cut in VW production reflected European market weakness which was starting to spread to core countries like Germany.

“We feel that this development underpins our view on European inventory levels, a tougher second half production outlook and ultimately growing pressure on industry participants to scale down the industry footprint in Europe,” said Deutsche Bank’s Jochen Gehrke.

Neil Winton – September 15, 2012

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