As Europe wallows in economic doldrums, at least one native son is thriving. Germany's Volkswagen AG, which has its sights set on becoming the world's top auto firm before the decade is out, is making headway. Across a broad range of businesses, the company's aggressive expansion plans are bearing fruit and the Greek dynamics of the firm's controlling families have settled down. The woes of its global rivals haven't hurt, either.
VW is already global champ of the bottom line, with an operating profit of nearly $15 billion last year and a goal to match that amount this year. Martin Winterkorn, chief executive, said "the unbroken automotive boom is providing additional tailwinds for our growth plans," referring to stronger sales in emerging markets, rather than in Europe where auto makers are struggling. Winterkorn drew a salary of 17.5 million Euros ($22.8 million) in 2011, more than double the year before -- and more than any chief executive of all companies listed on the DAX, Germany's main stock index. VW sold 8.27 million vehicles globally in 2011, up from 6.29 million the year before.
Most immediately, VW isn't backing down from a promise to double production this year at its Slovakian factory in Bratislava. The chief executive of the automaker's Volkswagen Group said on Wednesday that production will rise to more than 400,000 vehicles this year, compared to just over 210,000 last year. The plant used to build only large SUVs, but production is expanding thanks to the company's new Up minicar. The Up was shown as a variety of concept vehicles since 2007, before going into production last year. It could expand into a sub-brand of smaller, eco-friendly vehicles much like Toyota's (TM) Prius hybrid line.
VW has become that rare species of automotive giant that can generate profits in disparate markets, from barebones hatchbacks popular with college freshman to the uber-tony Bentley, vehicle of choice for billionaires' wives. The Volkswagen Group now owns Audi, Bentley, Bugatti, Lamborghini, SEAT, and Škoda as well as the truck manufacturer Scania. It has a 49.9% stake in Porsche. "VW has shown it can build the right cars for the right market at the right price," says Jesse Toprak, vice president of market intelligence for TrueCar.com, an automotive website. "It has a whole building full of people in Wolfsburg that do nothing but optimize pricing – and they're very good at it."
Audi, VW's mainline luxury-car subsidiary, is another bright spot. Long regarded as an also-ran in America, it has undergone a remarkable turnaround and seen sales surge. Earlier this month, it pulled forward its volume target, predicting it will sell 1.5 million vehicles before 2015. Outside of the U.S., Audi is benefiting from strong demand for luxury cars in China, India and Russia. Better yet, Audi overtook Mercedes-Benz as the second-largest premium brand by vehicle sales last year. And though it still sells fewer vehicles than BMW, it flew past its main rival in terms of profitability thanks to the economies of scale its parent makes possible. (BMW, by contrast, is an independent company.)
