“Strong Finances
Are Paramount”

A friend­ly demeanor, an author­i­ta­tive pres­ence: Dr. Arno Antlitz is respon­si­ble for finance at one of the world’s largest cor­po­ra­tions, Volk­swa­gen AG. In an exclu­sive inter­view with Porsche Con­sult­ing Mag­a­zine, Antlitz talks about finan­cial sus­tain­abil­i­ty, the huge trans­for­ma­tion process­es tak­ing place in the auto­mo­tive world, and deal­ing with risks. He sees new oppor­tu­ni­ties in the region, but new com­peti­tors for the Group as well—and also gives us a look into the con­tents of his wal­let. At present, his chief con­cern is how to tar­get and fill the most attrac­tive prof­it pools in the ongo­ing trans­for­ma­tion of the Group. 

Actu­al­ly, I’ve switched to pay­ing with my phone when­ev­er pos­si­ble. I’m increas­ing­ly short on cash (laughs). Park­ing meters can some­times be a prob­lem. For­tu­nate­ly, cash­less pay­ment options are becom­ing more com­mon. That’s the way of the future, I think.

Well, net liq­uid­i­ty is a good per­for­mance indi­ca­tor in the auto­mo­tive indus­try. And it’s hov­er­ing around 40 bil­lion euros. That’s very good news for Volkswagen—for all the employ­ees and also for us as board mem­bers. Solid finances like that give us the back­ing we need to mas­ter the trans­for­ma­tion going on in our indus­try right now.

Of course we’re affect­ed by infla­tion. We see it espe­cial­ly on the mar­kets for raw mate­ri­als and ener­gy, and are try­ing to com­pen­sate as much as pos­si­ble. We’ve always worked on our costs, and will keep doing so. That’s also our responsibility—not least of all to our cus­tomers. After all, our high-vol­ume brands stand for mobil­i­ty that’s not only attrac­tive but also afford­able. I myself, how­ev­er, am large­ly opti­mistic that infla­tion will set­tle down toward the end of the year. By “set­tle down” I don’t mean go back to zero. Infla­tion of around 2 or 3 per­cent would be a rea­son­able cor­ri­dor for 2024.

I feel the oppo­site of ner­vous. It’s incred­i­bly moti­vat­ing to steer the finan­cial side of a large cor­po­ra­tion like Volk­swa­gen on the road to elec­tric mobil­i­ty and dig­i­tal­iza­tion. We’re one of the biggest com­pa­nies in the world. Our com­mit­ment to car­bon-free mobil­i­ty there­fore means we have a lot of influ­ence. We’re play­ing a major role in decar­boniz­ing the entire indus­try and help­ing to make sure that life on our plan­et remains worth living.

We have a lot of excit­ing brands—Volkswagen, Audi, and Porsche, but also Škoda and Cupra—and in addi­tion, we’re set­ting up trans-brand plat­forms for soft­ware and bat­ter­ies as well as for mobil­i­ty in gen­er­al. Taken togeth­er, we can cover an extra­or­di­nary range of mar­ket seg­ments while also gen­er­at­ing scale effects. Then there are the advan­tages we just men­tioned of high net liq­uid­i­ty lev­els and a solid bot­tom line. On top of that, we have excel­lent teams. When I con­sid­er these fac­tors, I don’t see a need for us to be ner­vous. On the con­trary. We can tack­le this trans­for­ma­tion with con­fi­dence, and ini­ti­ate changes from a posi­tion of strength. We have the chance to be one of the most suc­cess­ful com­pa­nies on the market.

That’s a good sum­ma­ry, thank you. And pre­cise­ly that is the main job of a CFO. At the end of the day we have to be sure we can pay for the trans­for­ma­tion on the strength of our own oper­a­tions. The short-term issue is cash flow. That means man­ag­ing prof­it mar­gins, costs, rev­enues, and pro­duc­tiv­i­ty. Porsche Con­sult­ing is also very strong in this area. You’re help­ing us here, along with a lot of other clients around the world.

From now to 2030 we’ll be mov­ing from a world with just one prof­it pool, name­ly com­bus­tion drive sys­tems, to a world with three dif­fer­ent prof­it pools. We’ll still have com­bus­tion engines, but elec­tric mobil­i­ty will become increas­ing­ly impor­tant as well. And then there will also be soft­ware-based ser­vices. Dif­fer­ent approach­es will be need­ed to man­age these three prof­it pools. To keep com­bus­tion-dri­ven cars com­pet­i­tive in a mar­ket whose vol­ume is essen­tial­ly being cut in half, we’ll have to increase model effi­cien­cy. So here we’ll be focus­ing on pro­duc­tiv­i­ty and cost man­age­ment, because the scale effects are dis­ap­pear­ing. And the issue for elec­tric vehi­cles is how to suc­cess­ful­ly ramp them up in a mar­ket that con­tin­ues to show high lev­els of growth.

When it comes to the future costs of raw mate­ri­als, there are two levers. One is to safe­guard, or hedge. There are some mate­ri­als you can hedge, like nick­el, and we’ve done that very suc­cess­ful­ly. The big­ger lever, how­ev­er, is to enter raw mate­r­i­al sup­ply chains our­selves, which means keep­ing a stronger hold on value cre­ation. Last year we launched Pow­er­Co, for exam­ple. It’s a start-up, albeit a large one, that will han­dle our world­wide bat­tery activ­i­ties. One of its tasks is to build cell fac­to­ries. What’s every bit if not more impor­tant, how­ev­er, is to secure the raw mate­ri­als for these bat­ter­ies. We’ve start­ed a joint ven­ture with Umi­core, a mate­ri­als tech­nol­o­gy cor­po­ra­tion based in Bel­gium, to pro­duce cath­ode mate­ri­als for our Euro­pean bat­tery plants. And we’ve signed a mem­o­ran­dum of under­stand­ing with the Cana­di­an gov­ern­ment with the aim of strength­en­ing raw mate­r­i­al sup­ply chains in the North Amer­i­can region. There’ll be more such activ­i­ties in the future.

It would be hard to over­state the impor­tance of ESG and that’s a key part of our strat­e­gy. As the board mem­ber in charge of finances, I’m espe­cial­ly inter­est­ed in hav­ing good rat­ings. We’ll have to refi­nance our­selves annu­al­ly to the tune of tens of bil­lions of euros over the medi­um term—which makes a good ESG rat­ing all the more important.

We’re still not inter­est­ed in steel works hold­ings. Invest­ment in stronger ver­ti­cal inte­gra­tion, like the bat­tery sec­tor, should always be done on a very, very selec­tive basis. You can only spend each euro once. At the end of the day, we have to make sure that Volk­swa­gen has solid and robust finances at any given point in time. That is a pre­req­ui­site for mak­ing this trans­for­ma­tion work.

Absolute­ly! Strong finances are para­mount. Also and espe­cial­ly in a transformation.

We’re using strong rev­enues from the com­bus­tion sec­tor to pay for ramp­ing up our activ­i­ties in the elec­tric sec­tor. That’s the oppo­site of writ­ing things off. Our strat­e­gy is to con­vert our fac­to­ries one at a time. We’re not going to build new plants for elec­tric vehi­cles in Europe—instead, we’ll be trans­form­ing the ones we already have.

We hold a very impor­tant asset for the trans­for­ma­tion. And that is the MQB, the mod­u­lar trans­verse matrix for com­bus­tion vehi­cles. When the MQB was launched in 2012, it was crit­i­cized because of the very high invest­ment costs. But the gold­en age of the MQB is yet to come. Why is that? Because all the invest­ments have been made and the MQB com­bus­tion plat­form is absolute­ly com­pet­i­tive in its prod­uct sub­stance. We’ll equip it with bet­ter soft­ware and use it for anoth­er gen­er­a­tion of cars—when com­bus­tion dri­v­e­lines are being phased out. At lower costs, of course, and with suf­fi­cient flex­i­bil­i­ty to bring reduced vol­umes of com­bus­tion vehi­cles togeth­er on a trans-brand basis at MQB plants.

Not just div­i­dends but real money. The MQB also gives us a cru­cial cost advan­tage for the phase we’re in now. The same is true for elec­tric cars, for instance at Zwick­au, where we’re con­sol­i­dat­ing dif­fer­ent vehi­cle projects at a sin­gle plant. It’s very impor­tant to note that this doesn’t mean the cars will become more sim­i­lar for our cus­tomers. On the con­trary! We’re using the funds there­by freed up to define our brands even more sharply. If you com­pare a Škoda Enyaq, a VW ID.4, and an Audi Q4 e‑tron, you’ll see that those are very dif­fer­ent cars.

Resilience is a key con­cept in today’s world. I’ll start with oper­a­tional resilience. For years now, we’ve been opti­miz­ing the per­for­mance of our sup­ply chains. With sin­gle sourc­ing and just-in-time meth­ods, we’ve designed our sup­ply struc­tures for the great­est pos­si­ble effi­cien­cy. How­ev­er, we’ve entered a peri­od of increas­ing uncer­tain­ty, which means we have to focus much more on resilience. That in turn means high­er costs. But we can com­pen­sate for the costs with bet­ter plan­ning cer­tain­ty and greater flex­i­bil­i­ty. Resilience also means mak­ing your­self less depen­dent on req­ui­site sales vol­umes or in other words, low­er­ing your break-even point.

We have to make sure we’re aware of the con­se­quences. Glob­al­iza­tion, which means spread­ing labor through­out the world, has led to enor­mous increas­es in pros­per­i­ty. If the world now pulls back and makes many dif­fer­ent and small­er invest­ments instead of fewer larg­er ones—or in other words, if it loses its scale effects—then pro­duc­tion will become more expen­sive and cus­tomers will have to pay more. The gains in pros­per­i­ty we’ve seen in the past will ulti­mate­ly no longer be pos­si­ble. The pri­ma­ry goal for us as a glob­al com­pa­ny, there­fore, has to be pro­mot­ing an open and glob­al­ly net­worked world. But at the same time, we can’t be naïve and we need to pre­pare for new risks.

That brings me to the sec­ond type of resilience, name­ly strate­gic resilience, which is also impor­tant. We, the Volk­swa­gen cor­po­ra­tion, are very strong in Europe and China and we want that to con­tin­ue. But we have con­sid­er­able room for growth in the USA. In a world where geopo­lit­i­cal frame­work con­di­tions are becom­ing ever more chal­leng­ing and reg­u­la­to­ry land­scapes ever more com­plex, we espe­cial­ly need to strength­en our third pil­lar in the Unit­ed States. Maybe not only there. We’re also look­ing at India, in order to estab­lish a much more robust posi­tion in that new world. In my view, India has tremen­dous growth oppor­tu­ni­ties. In order to be truly resilient, we have to take an even more glob­al approach.

Keep­ing the soft­ware in our own hands is cru­cial if we want to keep deter­min­ing how cars will func­tion and to stay out in front in terms of data. But that doesn’t mean we can’t work with other com­pa­nies. I’m talk­ing very specif­i­cal­ly about set­ting up our auto­mo­tive soft­ware sub­sidiary CARIAD and its soft­ware plat­form. We’re eval­u­at­ing our strat­e­gy here right now. It’s clear that we have to devel­op and own most of the soft­ware our­selves. But that doesn’t stop us from work­ing with part­ners. The goal is to offer our cus­tomers the best pos­si­ble over­all pack­ages for rea­son­able prices at the ear­li­est points in time. That’s why we’re also count­ing ever more on the exper­tise of our partners.

Essen­tial­ly, it’s a mat­ter of the prof­it pools from dri­ver­less vehicles—from mobil­i­ty as a ser­vice and from soft­ware-based ser­vices. They’re still in their early stages, but we’re expect­ing the rev­enues to start flow­ing from small yet sig­nif­i­cant flag­ship projects in 2025, and then for prof­itable ser­vices to emerge and grow rapid­ly as of 2030—with high sales in both the ship­ping and pas­sen­ger sec­tors. But cus­tomers, too, will enjoy new oppor­tu­ni­ties. For exam­ple, I love ski­ing. Imag­ine a world in which you can get into your car Fri­day evening and wake up the next morn­ing at a ski resort after a good night’s sleep. I per­son­al­ly would be an extreme­ly strong poten­tial cus­tomer for this type of ser­vice (laughs).

We want to devel­op the soft­ware our­selves. But with intel­li­gent part­ner­ing strategies.

That’s sure­ly the ques­tion of how the econ­o­my will devel­op. We’re in an indus­try that’s cur­rent­ly strong­ly impact­ed by sup­ply short­ages. Nei­ther we nor other man­u­fac­tur­ers can make and sell as many cars as our cus­tomers would like. We can­not rule out the pos­si­bil­i­ty of a slow­down in the econ­o­my and a weak­en­ing of demand. We’re prepar­ing for this accord­ing­ly. At the same time, we’re expect­ing the world­wide sup­ply of semi­con­duc­tors to improve in 2023. That means a com­bi­na­tion of reduced demand and improved sup­ply. We shouldn’t then fall back into the old pat­tern of offer­ing dis­counts. We have to main­tain dis­ci­pline in our pricing.

That’s pos­si­ble, but the reflex shouldn’t be to hold back on future invest­ments just because that’s what com­peti­tors are doing. There have always been phas­es when the focus was on costs, and then phas­es that empha­size the over­ar­ch­ing strat­e­gy and growth. Right now both are impor­tant. That’s a real chal­lenge for a com­pa­ny. You can always pur­sue a sin­gle goal well, but it’s hard­er when you have more than one. That, how­ev­er, is exact­ly what hap­pens in a transformation.

Our aim is to save money on the one hand, and to spend or invest it on the other. The com­pa­nies that are best able to pur­sue these goals simul­ta­ne­ous­ly will emerge from the trans­for­ma­tion in the best shape.

I’ll have to think about whether that works (laughs).

… an unusu­al time also because dif­fer­ent parts of the com­pa­ny are affect­ed in dif­fer­ent ways. Some need to become lean­er, or down­size con­sid­er­ably, where­as oth­ers have to grow. That can gen­er­ate ten­sions with­in the com­pa­ny, which have to be man­aged with the help of com­mu­ni­ca­tions, train­ing, and trans­for­ma­tive programs.

You have to keep telling every­one involved that the employ­ees who are cur­rent­ly work­ing on cars with com­bus­tion engines are the ones who are fund­ing the trans­for­ma­tion. That is an impor­tant, chal­leng­ing, and essen­tial job. And because we’re pro­tect­ing all jobs until 2029, no one has to worry about their future.

It’s true that the new com­peti­tors enjoy a cer­tain oppor­tu­ni­ty by virtue of not hav­ing to restart any­thing. But on the other hand, they have to scale up from the begin­ning and build infra­struc­tures for pro­duc­tion, sales, after­sales, and financ­ing, in order to become truly rel­e­vant. We make ten mil­lion cars a year. We have the busi­ness process­es for ten mil­lion cars. We have the sales orga­ni­za­tion for ten mil­lion cars. What we have to trans­form, the new com­peti­tors first have to build up. They have to start up fac­to­ries and devel­op process­es for replace­ment parts, and it’s just as hard for them to get raw mate­ri­als as it is for us. Both of these paths have their chal­lenges. And if we are thor­ough in trans­form­ing our­selves, we’ll be in a very, very good posi­tion to keep pace with our competitors—or even exceed them.

Future-ori­ent­ed projects like ramp­ing up our bat­tery plants and increas­ing our soft­ware activ­i­ties, and espe­cial­ly expand­ing our world­wide pres­ence. Our plan­ning up to 2026 calls for invest­ing 159 bil­lion euros, of which 56 per­cent will already be going into future-ori­ent­ed fields. And you can be sure the ratio will shift even more toward the future in the years to come.

The best thing is on gifts for fam­i­ly and friends—like recent­ly at Christ­mas. It’s a real plea­sure to give gifts.