KEYNOTE: Hans Dieter Pötsch , How to Achieve Global Car Manufacturer , GCF 2011 -01-24.f4v

I'm very happy to be here today to explain a little bit to you a few elements of the strategy of Volkswagen. But let me first of all say that Volkswagen is very glad to be the ultimate sponsor of the GCF as we believe that innovation and competitiveness are two of the very key areas which decide on the sustainable future of companies. I was extremely happy to hear about the progress which had been made in this country yesterday during our celebration. Now I will try to elaborate on a few examples a little bit later on. But ladies and gentlemen, as emotion plays an important role in our business, let's get started with this and this means with respect to a real product and hopefully you already had a chance to have a look at the Porsche 918 Spider as this car is a perfect example for innovation and competitiveness, I would say even a masterpiece. And as words can only tell part of the story, I hope you're okay if we look at a little film which will only take I think 120.

So ladies and gentlemen, thank you, thank you very much. And I think it can be taken as a sign that green technology does not necessarily need to be boring. Now let's move a little bit more to the strategy of the company of Volkswagen. It is just a few years ago that we introduced our strategy 2018, and this is very clearly a strategy which is dedicated to move to the leadership in the global automotive industry based upon economic and ecological leadership. And you can identify a number of important areas on this slide here. Now it is important to understand that everything will be based on the very successful multibrand strategy of Volkswagen. Now in the meantime, we communicated this to our whole employees all around the globe. It's more than 400,000 people, and if you ask an employee in China or in South America wherever it is, everybody would know about the key contents of that strategy. Of course, it is also necessary to identify some key targets in this strategy, and here you can find four of the most important ones. And of course it starts with customer satisfaction and quality. Volkswagen also aimed to become the top employer. We will need a lot of new talents for the company to support that strategy. Of course, profitability should never be missed. You find it the target here, and this is to carry Volkswagen into a company delivering more than 10 million vehicles per annum.

Now growth obviously is an important part of that strategy, so let's have a look at the market and what we can expect there. Because as we all know, it is very difficult to grab market share in a shrinking market; it's still difficult also in a growing market, but it is clearly easier. Now the automotive industry had to go through a deep recession the last two years, but now I think most of the external sources are very clear that in the years to come there will be growth in the automotive industry. Still, what you can pick from this slide is that the more mature markets will grow not as fast as the emerging markets. And in this context, of course, it's very important that Volkswagen as of today has the number one position in China and the number one position in South America already. We have huge potential for improvement in North America, and it's very clear that we got to fill in the gaps in terms of creating a position in markets where we have kind of wide spots. Unfortunately, I got to say that this region here is so far one of the wide spots, that's why we are just in the process of rolling out a new strategy to become a key player here also. Now let's take one piece of evidence that the strategy started to work already, and this is the sales performance in 2010 where you can see that the world market grew by some 11% while Volkswagen grew by 13.3%, and you can also see that with very single exceptions we were able to beat the world market in almost all the regions.

Now clearly, China did play a big role in this, and as I already said, we are the number one car manufacturer in China. And there are some sources which are saying that after the huge growth rates we've seen in the past years, China will not grow as much, and there is some truth in that. Still, we believe there will be substantial growth in China and that it's one of the reasons why Volkswagen up until the year 2015 is going to invest more than 10 billion euros into that market. Now to give you a little bit more understanding of the product portfolio of the whole group, it is important that when you look at it, you differentiate between on the one hand the real premium or luxury cars because this is a very special market and you see examples here with the Porsche Panamera or the Audi A8, while we also play a big role in what we call the volume market, and Volkswagen probably is one of the key players there. And it's evident that to be able to be competitive, it's very important to play also a role there volume wise. Now while to talk about another characteristic, the premium to luxury market is a market where you have the so-called world cars because an Audi A8 will be all the same wherever you go, while Volkswagen Passat for example, you see the car up on the right is different, and this is the car which we introduced just a few weeks ago in Detroit on the motor show, and it is to serve mainly the US market. But we believe that the products on the right-hand side could also have a clean meaning for this region.

Now let me talk a little to touch on the issue of competitiveness, about this slide which is, I admit, not so easy to understand. But first of all, I got to talk a little bit about the key trends in automotive, and one of these trends is that our customers, of course, are very demanding, and this leads to more and more derivatives of cars, or in other words, to sell the same sales volume, you need to have many more models of cars available as compared to the past. Now consequently, if you followed this way without counteraction, it would mean an enormous degree of complexity and also it would destroy the economical business model. So what you can find then in these pictures here is the success of the Volkswagen modular toolkits. Now what is a toolkit? A toolkit is the attempt to standardize some very key elements of a car to make them available to quite a number of different models. Or in other words, while the customer, when he looks at the car, would identify a car as being something completely different, you know, below the sheet metal it carries a lot of similar components. Now by doing so, you can find on the right-hand side, we were able to take out very significant costs out of the business model. We save more than 20% in terms of unit costs, a similar ratio in terms of one-off expenditures, and we're able to cut engineer hours per vehicle by even 30%. It has a significant effect on weight and the emissions of cars, and over and above, it's a fundamental approach to reduce complexity, which of course is also an important element for all the after-sales activities. Now this is an area where in the meantime, after a lot of pain, I got to say, financially and also technically in past years, we believe we are one of the leaders in the automotive industry in the meantime.

Now to touch on another important issue, it is very clear that the automotive industry is going to go through a very interesting phase in the next years to come. Some people talk about a revolution, but it will be at least a very substantial evolution, and you can find a few elements of what is going to happen on this slide here. It talks, first of all, in the first column about the prime energy and where it comes from when one tries to power a car. Then in the second column, you would find then the real energy source which is used in the car. So we are very familiar, of course, with diesel fuel or gasoline, then we have natural gas and synthetic fuel, which, to make this little remark here, is extremely important to make use of the most modern engine technologies because the requirements in terms of clean fuel are extremely high. We have a number of regions in this world where we cannot supply and provide the most recent high-tech engines because the framework conditions in terms of clean fuel are just not existent. Sulfur as a substantial part of diesel, for example, is such a pain in the neck. Now hydrogen and electricity, of course, will be in the future increasingly power and energy sources for automobiles. Then in the third column, you can read a little bit, also in the Volkswagen terminology, the positions we currently hold. And we have, without any doubt, in the area, let me call it a little bit a negative perception, but I use the term conventional engines, gas engines or diesel engines, almost every year we get the price for the most outstanding engine in the world, so we are in a very much leading position there. We're introducing our first hybrid vehicles already, and what you find at the bottom of the page is also of high importance, that's the most recent version of our double clutch gearbox, and that's the most fuel-efficient gearbox available in the market. Of course, then we move up to fuel cells where you need hydrogen as the energy carrier, and full electrically powered cars. This is to say that Volkswagen, for a very simple reason, has to support all these key technologies because it's very clear, if you want to be a global player and if you have to accept that these key energy issues are in a very different phase if we talk about the various regions of this world, then there is no other way to go.

Now just in order to make sure that you don't take this what I was just saying as just theory talk, here are a couple of cars which will touch the market until 2014 will be a package of hybrid cars and fully electrically powered cars. You find two examples, three examples of fully electrical powered cars at the bottom of the page, and 2013 will be a very much milestone year for Volkswagen in this aspect because we will touch the market with these three cars, which again, in the meaning of what I said before, will have an offer on the premium luxury side and also an important offer for volume cars, with a fully electrically powered up vehicle that's a very compact vehicle for city traffic and the world-famous golf car. Now let me just make the point which is to say that there is a huge range in this product portfolio for Volkswagen as we're playing a key role with cars, any kinds, starting with a little compact car to the luxury car. We also play a key role in trucks. Here you see our key company, Scania, and we also hold a significant participation in MAN, and of course, the issue of environmentally friendly powertrains plays a very key role also on the truck side.

The strategy of Volkswagen was recognized by the markets, and that's why together with all the car manufacturers, we enjoyed a very positive performance on the capital markets in the past months. I have to admit that in the last few weeks, this turned a bit to the negative, was a correction of the market for all the manufacturers, but I think the future should be pretty bright also in this aspect. Now let's touch on another issue at the end of the presentation, and you see again here the multibrand approach of Volkswagen. We are operating in an area of more than 100 billion turnover, the company is very well founded in terms of financials without any doubt. And you will find a little special situation at Porsche, and I will have a few words on this now. Why did we take a decision to team up with Porsche? And in the meantime, we hold a close to 50% stake in the Porsche operating company. There are huge synergies in this combination, we call it the integrated automotive group, and it makes, for example, to Porsche also available everything which is available under the Volkswagen roof in terms of the most environmentally friendly powertrains and a lot of other things. We believe the synergetic potential could reach some 700 million per annum starting in the year 2013. Now you might know, a few of you know, that we had to pass through a number of milestones to get there, and the next important milestone is the capital increase on the Porsche side which we are going to execute between the end of March and the end of May. Then we are ready to go for the merger. I have to admit there are some legal and tax issues which we have to jump over. If this for whatever reason would not be successful, there is another approach, a put call option scheme in place, where we can grab the remaining 50% of the operating company of Porsche. So over and above, we are fully on our way to this integrated automotive group. And at the end, let me just simply say, I think we are a great team at Volkswagen concentrating on innovation and competition, and we are heavily emphasizing the environmental issue, the green issue, otherwise a car manufacturer could never be successful in the coming years. Now of course, we cannot win all the battles, but of course, I'm trying to finish my little speech here with a positive example. Now this is our race Touareg, and three of these cars in the Dakar rally which got finished a few weeks ago were positioned in the first three places, and this is an example that again we cannot always win, but a couple of times we are in the first row. Thank you very much for listening.