VW Targets €5 Billion Annual Cost Savings by 2017

CEO Martin Winterkorn says Volkswagen AG must offset its rising labor costs by improving productivity, cutting purchasing expenses and sharing more components among its 12 brands.

Reuters and Bloomberg News cite an internal presentation by Winterkorn that says the company wants to achieve savings of €5 billion ($6.8 billion) by 2017.

"Let's be honest," he tells managers: "We have a lot of catching up to do with our core competitors in terms of productivity."

Bernd Osterloh, who heads the company's works council, describes Winterkorn's comments as recognition by management that it must "fix its own mistakes."

VW aims to surpass Toyota Motor Corp. as the world's highest-volume carmaker by 2018. To help do so, the group will introduce 100 new or remodeled vehicles over the next 18 months.

But last year the VW brand's profit margin of 2.9% compared with 8.8% for Toyota and 9% for Hyundai.

VW employs about 575,000 workers more than any other carmakers. Data from industry group VDA estimates average wages for VW workers in Germany at more than €48 per hour compared with about €26 in the U.S. and €30 in Japan.