* Aims to triple VW brand margin to 6 pct by 2025
* Dropping diesel in the United States
* To invest 4.5 billion euros a year
* To focus on SUVs, electric cars; ditch weaker models
(Updates with Diess diesel comment, LA Auto Show details)
By Andreas Cremer
WOLFSBURG, Germany, Nov 22 Volkswagen
said on Tuesday it would drop diesel vehicles in the
United States and refocus on sport utility and electric
vehicles, as the automaker looks to reboot strategy for its core
brand in the Americas in the wake of a damaging diesel emissions
The move, announced by VW brand chief Herbert Diess, breaks
with earlier suggestions it could return to the once-popular
technology after the emissions scandal fades from memory.
The decision to drop diesel vehicles - which formerly made
up a quarter of the brand's U.S. sales - is just one element of
a strategic overhaul that Diess conceded could take a decade to
close the gap with rivals in the United States.
Volkswagen has agreed to pay billions of dollars in fines
and compensation payouts to U.S. customers since admitting last
year to cheating on federal diesel emissions tests.
"For years we have been lacking a blueprint for success in
the United States, while we are losing ground to rivals in
markets like Brazil or India," said Diess, a former BMW
executive who joined VW in July 2015. VW had missed "the SUV
boom," he said.
The brand now plans to have 19 SUV models globally by 2020,
up from just 2 now, and including some electric ones. It aims to
sell 1 million electric vehicles a year by 2025.
"At the moment we assume that we will offer no new diesel
vehicles in the U.S," Diess told European business daily
Volkswagen showcased its Atlas SUV, built expressly for the
U.S. market, at the Los Angeles Auto Show last week.
Diess said success in the Americas was vital to reviving the
core Volkswagen brand that accounted for 59 percent of the
German group's auto sales in 2015 but only 16 percent of group
underlying operating profit.
The CEO of Volkswagen Group of America, Hinrich Woebcken,
told reporters last week in Los Angeles that Volkswagen wants to
shift from being a "niche" player into a "family-oriented SUV
Entry into the lucrative SUV segment will help VW reach 60
to 70 percent of the U.S. market, up from an earlier 40 percent,
"We not only want to be profitable in Europe and China but
are determined to generate positive results in all major markets
by 2020," Diess told reporters.
Volkswagen last week announced a cost-cutting deal with
labour unions that will allow it to axe 30,000 jobs at the VW
brand by 2020.
On Tuesday, Diess set out a recovery strategy to 2025 and
beyond, spanning a wide range of initiatives including SUVs,
electric cars, digital services and plans to launch a budget car
in China and India by about 2019-2020.
The long-term goal, he said, was to lift the VW brand's
operating profit margin to 6 percent by 2025, compared with just
2 percent forecast for this year.
That would still lag some rivals such as PSA Peugeot Citroen
, which is aiming to hit 6 percent in 2021.
"It's good and necessary that VW is tackling those issues,
but it will be a long road," said M.M. Warburg analyst Marc-Rene
Tonn, referring to plans to fix underperforming markets and lift
margins. He has a "hold" rating on Volkswagen shares.
Shares in Volkswagen, whose 12 brands range from upmarket
Audi and Porsche to the cheaper SEAT and Skoda, rose 0.42
percent to close at 120.45 euros.
The stock is still down around a quarter in value from
before the emissions scandal.
($1 = 0.9403 euros)
(Additional reporting by Alexandria Sage; Writing by Georgina
Prodhan and Mark Potter; Editing by Maria Sheahan/Keith