Production

In fiscal year 2013, the Volkswagen Group again expanded its production network and increased its global production volume by 5.1% to 9.7 million vehicles. Productivity improved by 5.7% year-on-year despite difficult conditions in many markets. In the European market, declining volumes impacted productivity trends for some vehicle segments. However, this was more than offset by the increasing unit sales in China and the Group’s systematic implementation of its production system.

“Production 2018” strategy

The goal of our “Production 2018” strategy, which the Production function pursues in all Group brands and all regions, is to build the world’s most powerful and most fascinating automotive production system. The core objectives comprise enthusiastic customers, a higher earnings contribution, a global production network as well as a high level of attractiveness for employees. These objectives were assigned 13 challenges. Measures have been formulated for each of these challenges to improve production processes and connect them across all brands and all regions worldwide. This will ensure that our strategy is implemented sustainably and that our organization is prepared to meet future requirements.

Production locations

The Volkswagen Group’s global production network grew in 2013 from 99 to 106 locations. At the end of the reporting period, it consisted of 61 passenger car, commercial vehicle and motorcycle factories as well as 45 powertrain und component plants.

VEHICLE PRODUCTION LOCATIONS OF THE VOLKSWAGEN GROUP
Share of total production 2013 in percent

The Group’s 100th location opened in Silao, Mexico, back in spring 2013; this engine plant is the fourth production site in North America. This was followed by the MAN commercial vehicle plant in St. Petersburg and then by a total three vehicle plants in China – in Urumqi, Foshan and Ningbo. In addition, operations also began at a new engine plant in Changchun and, at the end of the year, a production location in Foshan for axles and struts, in order to safeguard the local supply of components to Chinese plants.

With 68 vehicle and component locations, Europe remains at the heart of our production network; 28 of these plants are located in Germany alone. The Asia-Pacific region is increasingly important, with 22 locations, 17 of which are in China. North America now has four production sites; the number of production sites in South America (nine sites) and Africa (three sites) remained unchanged in the reporting period.

Construction of Audi’s first automobile factory in North America has been underway since May 2013 in San José Chiapa, Mexico. The highly efficient production facility, with an annual capacity of 150,000 vehicles, is expected to start production from mid-2016; Audi’s next generation of the Q5 will be produced here.

Starting in 2015, Audi will begin production for the local market, laying the foundation for further growth in South America: the new Audi A3 saloon and the Audi Q3 will be produced in Volkswagen do Brasil’s Curitiba plant. Volkswagen do Brasil is also expanding this plant to accommodate production of the new Golf, thus bringing our most advanced production technology, the Modular Transverse Toolkit (MQB), to Brazil starting in 2015.

Construction for a new vehicle plant began in May 2013 in Changsha, China, where an end-to-end automobile production facility with an annual capacity of 300,000 vehicles is being built for the Shanghai-Volkswagen joint venture by 2015 in the Southern central region of China.

We expanded our production partnerships as well as our production network in the reporting period. In Russia for example, our partner GAZ has been producing the Jetta at its Nizhny Novgorod site since the first half of 2013, and began production of the ŠKODA Octavia shortly thereafter.

The ASEAN region plays an important role in our growth strategy. It has high potential demand and is extremely diverse, for example in terms of its culture, income, vehicle requirements and customs and tax legislation. This is why we developed country-specific, long-term production concepts to support our local sales activities as part of our strategy for the largest markets in this region.

Our involvement in Indonesia started with local vehicle assembly in 2009 and has developed very positively in recent years. Because of the great success seen in this market, we opened a new assembly facility with greater capacity in Cikampek together with our local partner Indomobil in December 2013. In addition, we expanded the product portfolio in the last year to include the Tiguan and the new Golf. This brings the number of models assembled there to six for the Volkswagen Passenger Cars, Audi and Volkswagen Commercial Vehicles brands.

In Malaysia, we are currently expanding our local production in cooperation with our local partner DRB-HICOM. A new CKD production facility opened in 2013 at its site where up to 40,000 vehicles a year can be assembled. Currently, the Polo, Jetta and Passat models are being produced there.

We are also examining potential new production locations in the rest of the ASEAN region in order to achieve our ambitious unit sales targets.

New start-ups and production milestones

The Volkswagen Group implemented 27 new production start-ups in 2013, ten of which were new or successor products.

A highlight for the Volkswagen Passenger Cars brand was the start of production of the Golf estate in May 2013 at the Zwickau location. The start of manufacturing in Bratislava of the first fully electronic series vehicle – the e-up! – in July marked another milestone.

Audi kicked off the series production of the Audi A3 saloon in May at its expanded production facility in Györ, Hungary. The ŠKODA brand rolled out production of the seventh generation of the Octavia Combi in Mladá Boleslav in March and expanded its product range in August to include the Rapid Spaceback. The SEAT brand rounded off its Leon family in Martorell, Spain, in September with the Leon ST. Bentley began production of the second generation of the Flying Spur in Crewe in the United Kingdom.

We began production of the new Golf in China in July, the first time that the new generation of the bestselling model is being produced outside Europe; this also marked the start of operations at our new Foshan site.

The Group is continuing its success story in the South American small car segment in Taubaté in Brazil, where it has been producing the up! since the fourth quarter. Finally, at the end of 2013, production of the fifth series from Porsche started in Leipzig: the Macan.

The Volkswagen Group again celebrated anniversaries in 2013: in February, ŠKODA produced the 15 millionth vehicle since becoming a member of the Group. The eight millionth Gol was produced in March in Brazil. In June, the Wolfsburg plant reached the 30 million milestone for Golf models manufactured worldwide. The 10 millionth vehicle rolled off the production line in August in Puebla, Mexico. In November, the 25 millionth engine in the history of Audi Hungaria left the production facilities in Györ.

Flexibility in production

We design our production locations to be as flexible as possible. We adapt existing vehicle plants for multiple brands, converting them into multiple-brand plants. This allows us to react more easily to changing market requirements, exploit cross-brand synergies, improve processes and reduce investments.

One example is the new location that opened in Foshan, China, in September 2013: this extremely flexible vehicle plant is currently producing the Audi A3 saloon, the Audi A3 Sportback and the new Golf. If demand for one of these models rises, the production facilities permit us to increase the production volume of that model and lower that of another.

Our customers increasingly want more customized vehicles. A growing offering of vehicle and powertrain derivatives enables us to cater to this wish. Thanks to the modular toolkits developed by the Group, we can produce a wide variety of vehicle and drive concepts with a minimum of effort using a uniform vehicle architecture. Using modular toolkits across all brands – accompanied by the resulting standardization and synergies in the production process – allows us to efficiently produce different models on a single production line.

We are also standardizing operating equipment, systems, production areas and even entire factories. This makes us significantly more flexible when we are adapting our plants to accommodate multiple brands, accelerating and safeguarding new vehicle start-ups.

The Group’s production system

Our Group production system was introduced in 2007 and involves employees in optimizing corporate processes. Since then, we have systematically applied its principles and methods to all brands and areas in the Group, anchoring it in each of them. We are successfully increasing quality, productivity, ergonomics, leadership and teamwork by using a continuous improvement process (CIP) in the Company. Additional process and organizational improvements are intended to make Volkswagen number one in the automotive industry by 2018 in terms of customer satisfaction, its attractiveness as an employer, profitability and growth.

The introduction of the Group’s production system was an important step toward to creating a value-driven company with coordinated processes. Throughout the world, we are implementing these principles and methods at the brand and regional locations and are continuing to systematically enhance the production system in order to safeguard what we have accomplished to date for the long term.

Our ambitious growth objectives also create a challenge for logistics. The “Neues Logistik Konzept” (NLK – New Logistics Concept) manages the difficulties arising from the increasing volume of materials and the widening variety of components. We are using this to make our material and information flows even more efficient throughout the Group. Initially, our focus was on making significant improvements in providing materials to our assembly lines. In the future, we will turn our attention more strongly towards the upstream transportation and logistics processes between our locations and our suppliers, where potential synergies are high. These mainly result from smaller inventories, greater transparency as well as more stable processes and higher quality information.

Efficient production

To achieve our goal of becoming the world’s most sustainable automobile manufacturer, we have begun to redesign production processes at all locations along end-to-end ecological lines. Our aim is to align economics with ecology. We demonstrably cut costs and conserve the environment by using resources efficiently and cutting emissions. For example, we recorded CO₂ savings of over 229,000 t in 2013 by implementing more than 1,260 measures to improve energy and environmental processes in the production of passenger cars and light commercial vehicles in the course of a system-based exchange of best practices. At the same time, there is also an economic benefit as this corresponds to cost savings of more than €28 million each year.

The Group’s brands are implementing the Volkswagen Group’s ecological reorganization by means of their own cross-disciplinary strategies. For example, the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brands are bundling all ecological measures related to efficient use of resources and lower emissions in production in their holistic “Think Blue. Factory.” program, which was launched in 2011 under the motto “More sustainability – less environmental impact”. When we systematically share knowledge between the locations and across trades, we benefit from our employees’ collective expertise. “Think Blue. Factory.” is part of “Think Blue.”, the Volkswagen brand’s holistic initiative promoting ecological sustainability.

Other brands have launched initiatives to reveal potential, develop strategies and solutions, and take action in order to meet the Volkswagen Group’s sustainability goals. Examples include the ŠKODA brand’s “GreenFuture” initiative, the SEAT brand’s “ECOMOTIVE Factory” initiative and the MAN brand’s climate strategy.

Here are a few examples of ecological activities that were implemented successfully in the reporting period:

In order to exploit existing energy-saving potential, an energy value stream analysis pilot project was implemented in the paint shop and body shell production facility at the Bratislava plant. The first step was to determine how much energy is needed for production and where there are potential savings so that consumption can be reduced in the next step. Our aim with this measure is to target energy savings of 49,000 MWh and CO₂ savings of 9,800 t. At the same time, these savings will cut over €700,000 in costs each year.

The location of the Emden plant is being leveraged to save energy by using geothermal energy. When the body shell production building was built, geothermal piles were set into the ground. These piles harness the coldness in the ground to cool equipment during the production process. This measure offers savings of 12,000 MWh of energy and 25,000 m³ of water and also cuts our costs by €70,000 a year compared with a cooling tower that would otherwise be needed.

The Pamplona plant can reduce or avoid waste thanks to its successful waste strategy. It prepares a list of the types of waste that can be reused. In addition, it identifies which processes create waste so that new process workflows can be developed to reduce or reuse waste. Already, 380 t of paint sludge have been cut, saving us €60,000 a year. The structured approach enshrined in this waste strategy is also being rolled out at other Volkswagen Passenger Cars and Commercial Vehicles plants, reducing the amount of waste they produce.

The Braunschweig plant can save 34,380 m³ of water by using conductivity-based spray water metering in its paintshops. This also makes a difference in costs: this optimization measure saves approximately €232,000 each year.

In 2013, SEAT completed the third and final construction phase of its “SEAT al sol” solar rooftop park at its Martorell plant in Spain. A total of 53,000 solar panels cover an area of 276,000 m² and were installed on the roofs of production facilities and delivery areas. With an annual capacity of 15,000 MWh of electricity, this helps SEAT cut its CO₂ emissions by 7,000 t/year.

As the Volkswagen Group’s ecological restructuring takes place, it is essential to get employees even more involved. For this reason, the training center in Chemnitz that is open to all Group employees developed an energy training program in 2013 that reproduces a realistic production environment and simulates different energy situations. The aim is to teach employees basic skills for saving energy and to enable them to identify energy waste in their immediate working environment.