Key R&D figures

Key R&D figures

Integration of external R&D expertise

Total research and development costs for fiscal year 2012 In addition to our own internal resources, the expertise of in the Automotive Division increased by 32.1% year-on- our suppliers plays a key role in the development process year. Alongside new models, the main focus was on the and will help us to systematically advance our new model electrification of our vehicle portfolio and increasing the rollout in the coming years. The early-stage, close collab- efficiency of our range of engines, among other things, oration between our internal and external resources whereas alternative drive technologies accounted for an guarantees that we can successfully complete projects with increasing proportion. The capitalization ratio increased the quality we expect in reduced development times. We to 27.5% (23.1%). Research and development costs recog- are able to draw on external expertise primarily in creative nized in the income statement in accordance with IFRS s processes, as well as in the area of virtual technologies and were higher than in 2011, at €8.9 billion (€7.2 billion). megatrends.

This meant that their ratio to sales revenue in the Auto- We also use external capacity for support services, motive Division remained unchanged at 5.1% (5.1%). downstream processes such as series management, and

On December 31, 2012, the Research and Development activities that are not customer-facing but generate improve- function – including the equity-accounted joint venture ments. In addition, we are expanding our cooperation with companies in China – employed 42,089 people Group-wide subsequent series suppliers, as their expertise in the (+21.1%), corresponding to 7.7% of the total headcount. development phase of modules and components is partic- ularly important.

RESEARCH AN D DEVELOPMENT COSTS I N THE AUTOMOTIVE DIVISION

Total research and development costs

5,790 5,926 of which capitalized development costs

1,947 2,216 Capitalization ratio in %

27.5 23.1 26.6 33.6 37.4 Amortization of capitalized development costs

Research and development costs recognized in the income statement

PROCU REMENT

We are specifically examining on an ongoing basis Procurement focused its work in the reporting period on

whether introducing new or optimizing existing processes safeguarding new vehicle start-ups, particularly with a view

will deliver the expected advantages in terms of time and to the Modular Transverse Toolkit (MQB), developing new

quality. This is how we ensure that the measures taken are procurement markets and preemptively assuring quality

effective for the long term.

in the supply chains.

Stable supply situation for procured components and raw

Procurement strategy

materials

The four procurement goals derived from the Group Strategy In the reporting period, the supply situation was dominated 2018 were also relevant in the reporting period: first, to

by growing vehicle sales in China, North and South provide market-centric premium quality and innovations

America, as well as the further increase in demand in all at competitive prices; second, to meet cost targets and

segments for vehicles with high-quality equipment features. ensure the profitability of our products over their entire

Because of this, the need for procured components grew lifecycle; third, to safeguard global volume growth through

and changed. Supplies to all component and vehicle plants the permanent availability and consistently high quality of

were nevertheless guaranteed at all times. Particularly procured components; and fourth, to continue to raise

noteworthy is the fact that we successfully safeguarded employee satisfaction and the attractiveness of the pro-

new vehicle start-ups based on the Modular Transverse curement function.

Toolkit (MQB) at the Audi, Volkswagen and SEAT brands. We have assigned action areas to each of these goals.

In addition, there were unplanned events in 2012 that Currently, 30 programs with precisely defined measures

led to production shortfalls at our raw materials suppliers, and responsibilities for all brands and regions ensure that

among other things. The effectiveness of our processes and these goals are achieved. The uniform procurement strategy safety mechanisms that we had installed and embedded as

that covers all brands and all regions enables us to take

a fundamental part of the organization after the lessons advantage of opportunities throughout the Group, pool

learned from the natural disasters in Japan in 2011 became strengths and minimize weaknesses and risks at the same

clear in these situations. In addition to working together time.

with suppliers, a cross-business task force, which is an established part of our crisis management, helps to guarantee

Expanding the process optimization program

the security of supplies at all times. Process optimization has become a core component of

Continuously integrating our suppliers to the demand work in the procurement function. Experts are working on

and capacity management systems is a key tool for safe- standardizing processes and continuously improving them

guarding supplies. The integrated capacity management in all brands and all regions of the Volkswagen Group. We

system INCA offers the suppliers involved the ability to added the procurement organizations of Volkswagen manage their capacities online. They also receive an insight Group of America, Volkswagen India, Volkswagen Group

into the requirement forecasts for their parts for a planning Rus, Porsche, Scania and MAN to the procurement process

horizon of up to 24 months.

optimization program in 2012. The Porsche brand, for Most input and raw materials saw declining prices on example, was integrated with the Group’s core procurement

the spot markets in 2012 because of the ongoing crisis in processes within four months. This means that joint deci-

the eurozone. However, despite this trend, prices remained sions about procurement issues were already made in 2012.

at a high level and were subject to pronounced volatility.

MANAGEMENT REPORT 201

Business Development Shares and Bonds Results of Operations, Financial Position and Net Assets Volkswagen AG (HGB) Value-Enhancing Factors

Risk Report Report on Expected Developments

Overall, the markets were very strained and nervous, and ing) program to develop affordable procurement markets. crude oil prices in particular were extremely volatile and

The objective of this program is to use competitive highly sensitive in relation to political uncertainties and

procurement markets to not only produce localized vehicle the impact of speculation.

projects there, but also to use them for vehicle projects in The economic effects also impacted prices for rare

other countries. Components from the C3 regions are also earths. In comparison to the historical high prices reached

being exported without us having to lower our quality in 2011, they declined on the Chinese-dominated market.

standards.

However, they remained at a comparatively high level. We further developed our regional offices worldwide at

a cross-business area level so as to guarantee the share of

Procured component and supplier management to assure

C3 contracts in the flow of goods for the long term. These

quality within the supply process

offices identify new suppliers and guide them until the As part of our growth strategy, both we and our partners

contract award decision, while procured components are faced with enormous challenges in the global procure-

management at the regional offices subsequently ensures ment of components. Procured components management

the ability of the suppliers to deliver.

is procurement’s “technical arm”. Tool and process experts Southeast Asia is one example of where we have success- on the ground preemptively ensure the preparation of

fully developed new markets. Via the regional office in Kuala tools and the development of suppliers’ new production

Lumpur, which opened in 2010, more than 250 suppliers sites for new vehicle start-ups. Procured components from the whole of Southeast Asia have already been linked to management also supports line procurement to safeguard

the Volkswagen systems environment. These local suppliers the supply of components. New technological fields have

have been awarded a significant purchasing volume. been added to the functional portfolio to reflect the volatile environment and technical complexity. Against this back-

Sustainability in supplier relationships

ground, procured components management is a core com- Since 2006, the “sustainability in supplier relationships” ponent for safeguarding global volumes.

concept has ensured that our business partners are also Subcontractors are a particular focus for procured

complying with the environmental and social standards components management. Volkswagen’s direct suppliers

that apply throughout the Group. The concept’s main normally use a high number of subcontractors, whose value

pillars are: the sustainability standards signed by the creation processes represent an additional challenge. For

member of the Group Board of Management responsible this reason, the entire value creation process is already

for Procurement and by the Group Chief Compliance analyzed shortly before contracting in a goal agreement

Officer, an early warning system to minimize risks, trans- discussion with the supplier by looking at all business

parency in the procurement process, and supplier moni- areas and adapted accordingly.

toring and development. Optimizing sustainability aspects together with our business partners and safeguarding our

Developing new procurement markets

volume flows for the long term are at the forefront here. We defined measures to achieve the cost targets set as part of

We intensified and stabilized our suppliers’ cooperation the Group Strategy 2018, and these were also systematically

with the Group’s brands and regions in the reporting implemented in 2012. One of these measures is imple-

period. Among other things, we held a large number of menting the C3 Sourcing (Cost-Competitive Country Sourc-

information events and made an Internet-based training

202

module available on the Group Business Platform. All period, this resulted not only in increased awareness at suppliers who are registered on the platform have been

our suppliers, but also in optimization in the value chain, asked to complete this training module with a final for example, by minimizing supply risks. performance review. The tool can also be used by all of Volkswagen’s procurement employees in order to expand

Purchasing volume

their knowledge of sustainability in supplier relationships. The Volkswagen Group’s purchasing volume mainly Furthermore, all business partners have been asked to

comprises production materials, services and investments. fill out a questionnaire on our sustainability standards. A

In the reporting period – including the Chinese joint central Group office is monitoring the results in order to

venture companies – it saw an increase of 16.8% to €128.7 develop areas for improvement and action plans for these

billion. The proportion attributable to German suppliers measures together with our suppliers. In the reporting

was 38.8% (39.3%).

PURCHASING VOLUME BY BRAN D AN D MARKET

Volkswagen Passenger Cars 77.0 69.7 +10.5 Audi 1 22.7 21.0 +7.9

ŠKODA 6.6 6.6 +0.2 SEAT

3.7 3.4 +9.7 Bentley

0.6 0.5 +11.2 Porsche 2 1.4 –

– Volkswagen Commercial Vehicles