Volkswagen Ag - Operating Environment

Basic introduction

The Volkswagen group has its headquarters in Wolfsburg, Germany. With around 350,000 employees and annual deliveries of more than 5 millions vehicles Volkswagen is Germany’s leading automobile manufacturer and therefore belongs to Europe’s main leaders. Volkswagen runs 58 production plants worldwide and sells cars in over 150 countries. Main regions to sell apart from Europe are North America and China.

The business is divided into two different sectors:

1. The automobile sector, which includes the two brand sectors Volkswagen, with Bugatti, Skoda and Bentley and the Audi group including Seat, Lamborghini and Rolls Royce. Moreover, there is a sector for commercial vehicles.

2. Another sector is built up by the financial services that contain the Volkswagen Bank, car leasing programs and Europcar vehicle rental.

The main activity is the production and sale of passenger cars which forms about 90% of the business.

The Goal of the Volkswagen group is to return to the world’s leading automobile manufacturers by creating attractive, safe and environmentally sound vehicles.

This should be reached with help of a change in the policy that include the idea of a strict defined separation of the different section and moreover of the different brands that may lead to a more independent treatment.

The year 2005 has recorded an increase of vehicle deliveries by 3.2 % up to 5, 24 million which lead to a final turnover of 95, 3 billion euro.

Nevertheless the Volkswagen group is said to have missed the connection to the world’s leading automobile companies.

The main competitors and the relative size and position of Volkswagen

Once being part of the leading groups the Volkswagen group is no longer able to keep the track with their competitors like General Motors and Ford that still lead the world market but followed by Toyota that is rapidly closing on GM and forecasted to be the world leader by 2006 already.

Moreover, Fiat, Renault PSA and Citroen, Nissan, Isuzu, Mazda and Honda, DaimlerChrysler, BMW and Porsche, Kia and Hyundai Motors are the other main competitors.

The car market is enormous and because of the huge amount of competitors really dominating the whole market is almost impossible.

The whole market can be divided into three regions.

1. The Asian manufacturers have the big advantages of low costs and wages. The cars that are mostly exported are even supported by often weak currencies in the importing countries.

2. US companies, always close to bankruptcy, try to avoid financial fiascos by cutting production capacity and jobs in order to increase the market share.

3. The European car manufacturers are in a quite similar position, facing high labour costs and costs of raw material, trying to cut wages and jobs.

The current market share of Volkswagen worldwide is 12% at the time and therefore is ranked on position number four in the worldwide ranking of automobile manufacturers in regard to produced vehicles in 2005.

Position Company Country Quantity

1. General Motors

USA

8.066.536

2. Toyota

Japan

6.814.554

3. Ford Motor Company

USA

6.644.024

4. Volkswagen

Germany

5.095.480

5. DaimlerChrysler

Germany

4.627.883

6. Peugeot

France

3.405.245

7. Honda

Japan

3.237.434

8. Nissan

Japan

3.190.219

9. Hyundai

South