VW to clean up its act

Volkswagen will execute a multi-phase plan to improve the group's outlook and rehabilitate its brand image in the wake of the dieselgate scandal, CEO Matthias Müller has announced at the group's 56th annual general meeting in Hanover, Germany.

"We have launched the biggest change process in Volkswagen's history," he said. "In TOGETHER – Strategy 2025, we have formulated a clear vision for the next decade."

The announcement could be seen as a sop to those who have criticised the Volkswagen Group over the Dieselgate affair. But it is also an acknowledgement that upcoming emissions legislation will force all manufacturers to lower fleet emissions in a drastic way – electrification being the method of choice for most European car companies.

"We expect that by [2025] we will be selling about two to three million pure-electric automobiles a year. This will account for a significant share – an estimated 25 per cent – of our total sales volume. We are stepping up our efforts accordingly and will launch a multi-billion euro investment program," Müller declared.

In addition to 30 new electric vehicle models to be introduced before 2025, however, the company plans to introduce particulate filters for its petrol-engined models, effective from June next year – beating Mercedes-Benz to the punch on that score.

"We will successively equip the Group's new TSI and TFSI engines with gasoline particulate filters," Müller told the 3000 shareholders attending the meeting.

"This initiative will begin with the 1.4 liter TSI engine in the new VW Tiguan and the Audi A5 in June 2017. This will reduce particulate emissions by up to 90 percent. Up to seven million Volkswagen vehicles could be equipped with this technology each year by 2022."

The VW CEO says that the world will remain highly dependent on internal combustion to power cars, right through to 2030 at least.

"It will be with us for some time to come and will still account for around two-thirds of the new vehicles market volumes in 2030. But that also means the other third will be electrically powered. The breakthrough for e-mobility will long be reality by then. And we are determined to make e-mobility a new hallmark of Volkswagen."

Also announced in his speech was the group's efforts to improve its standing in terms of 'integrity and legal affairs'. Central to that is a recall of vehicles fitted with 'defeat device' software that changed the engine's operating mode when it detected the vehicle was being tested for emissions.

The recall in Germany continues for vehicles that failed to meet the legislated emissions obligations. To date, more than 3.7 million cars have been recalled with the approval of the KBA (the German Federal Motor Transport Authority).

"We expect the recall campaign to really pick up speed now," Müller said.

"Tens of thousands of vehicle owners will be informed in the next weeks and asked to take their vehicles to the workshops. Our customers can rest assured that we will continue to do our utmost to make every effort to execute the recall campaign as quickly, professionally and satisfactorily as possible."

According to Müller, the past is the past, but the lessons learned won't be forgotten – or glossed over.

"What's done cannot be undone. But what does lie in our power is ensuring we act in a responsible manner. This is our commitment to you. What unites all of us with a role to play here at Volkswagen – whether it be the Supervisory Board, Board of Management, executives, employee representatives or workers – is the desire to do everything we can to win back trust.

"What our experience over the last few months has shown is that long-term success is only possible where law-abiding and value-driven behavior forms the basis for our daily actions and decision-making."

An internal audit run in parallel to the external investigation by an American legal firm was mentioned in the VW boss's speech.

"Based on what we now know, in the past there were certain process deficits in some technical subdivisions in addition to misconduct on the part of individuals. This was true of the testing and release processes for the engine management systems, for example. The audit identified weaknesses and proposed remedial measures.

"We have therefore decided that emissions tests at our company will, as a general principle, be externally evaluated by independent third parties in future. Real-world random testing of vehicle emissions behavior on the road will also be introduced. I strongly believe that our industry requires more transparency, courage and openness in dealing with this issue. And this is why we firmly support political initiatives in this area."

Two other challenges face Volkswagen in the short term, Müller said: reducing cost and redoubling innovative product development. Innovation is bound up with autonomous driving, digitalisation and mobility services.

"The ongoing efficiency programs are in full swing throughout the Group," Müller said.

"And with regard to capital expenditure, we will set the necessary priorities and maintain strict discipline."

With respect to innovation, VW will focus its attention on alternative energy drive systems, battery technology development and autonomous motoring.

"As far as the development of fuel cells is concerned, we intend to stay on the ball in this area too. And we will be ready when the time is ripe," Müller explained.

In the meantime, electric vehicles will be at the forefront of reducing fleet emissions, but that will place a heavy burden on battery technology and development – a point Müller noted in his speech.

"We will need 150 gigawatt hours of battery capacity by 2025 for our own e-fleet alone – which would make for a massive procurement volume," the CEO explained.

"We will examine in detail all strategic options for developing battery technology as a new core competency for the Volkswagen Group. In doing so, we will be scrutinizing the entire process chain – from raw material right through to battery production."

Volkswagen is jumping on the autonomous motoring bandwagon, Müller remarked.

"Fully autonomous vehicles with a self-driving system developed in-house will enter the market by the beginning of the next decade. Cumulative investment in new autonomous mobility solutions will amount to several billion euros."