In fiscal year 2015, the Volkswagen Group’s global production volume passed the ten-million mark again. Productivity increased by 3.5% year-on-year despite the continuing difficult conditions in many markets. The rising unit sales figures in Germany and Western Europe and the systematic implementation of the Group production system compensated for the decreasing volumes in the South American and Russian markets.
“Production 2018” strategy
The vision of our “Production 2018” strategy is to build the world’s most powerful and most fascinating automotive production system. To make this a reality, we have defined four core objectives: in all Group brands and all regions, a systematic effort was made in fiscal year 2015 to excite our customers, lift the earnings contribution, structure production capacities in line with the market and make production more attractive to employees.
In order to achieve the objectives set, we defined a total of 13 challenges and continuously worked on these. The challenges represent the key action areas in Production, such as the implementation of the modular toolkit strategy and the expansion of the global production network, and are backed up with concrete actions. Responsibility for their implementation has been assigned to Board of Management and executive management sponsorships as well as project teams from all brands and regions. In order to identify a possible need for expansion or adaptation to meet these challenges at an early stage, key future trends and their impact were discussed. The results are incorporated into the strategy work.
The Group’s latest location in China, the vehicle plant in Changsha, came on stream in May 2015. The Volkswagen Group’s global production network thus had 119 locations at the end of the reporting period, of which 69 were passenger car, commercial vehicle and motorcycle locations and 50 were powertrain and component locations.
VEHICLE PRODUCTION LOCATIONS OF THE VOLKSWAGEN GROUP
Share of total production 2015 in percent
With 71 locations, Europe remains our most important production region for vehicle and component production; 28 of these sites are located in Germany alone. The Asia-Pacific region is playing an increasingly important role, with 31 locations. The number of production sites in North America (four) and South America (nine) remained unchanged in the reporting period. The Group operates four locations in Africa.
In Europe, a new plant for the Volkswagen Commercial Vehicles brand in Wrzesnia, Poland, has been under construction since the end of 2014, in addition to the existing plant in Poznan. Production of the Crafter will begin there in the second half of 2016, with an annual capacity of 100,000 vehicles.
In order to secure and expand our market position in China, a new vehicle plant in Changsha with an annual capacity of 300,000 vehicles was inaugurated in May 2015. Furthermore, the capacity at the Chengdu location is being expanded by 150,000 vehicles by 2016. The new Ningbo II vehicle plant with a capacity of 150,000 vehicles per year will be opened at the end of 2017.
Moreover, in Mexico the Audi brand’s San José Chiapa plant, which will have a capacity of 150,000 vehicles per year, will start production in mid-2016. In the US market, the product range will be supplemented from the end of 2016 by the new midsize SUV produced in Volkswagen’s Chattanooga plant. In addition, the long wheelbase Tiguan is to be produced for the US market in the North America region from 2017.
We are also expanding the production network in the engine business area. The Györ and Zuffenhausen engine plants are currently being set up for the new V6 and V8 petrol engines for cross-brand use. Production will start in the first half of 2016.
Capacity utilization of the locations in the Volkswagen Group’s production network is further enhanced by supplying them with complete knock-down (CKD) kits for local assembly.
In 2015, a CKD facility was opened at the Curitiba plant in Brazil. The Volkswagen Golf and Audi A3 saloon models are manufactured there. The pressings and assembly modules are largely supplied from the Puebla and Györ locations.
A new licensed production facility was opened in Nigeria, West Africa, in July 2015. The assembly is operated by our partner, the Stallion Group. It produces models for the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brand. Volkswagen is thus increasing its involvement in sub-Saharan Africa.
We are continuously investigating the possibility of further production locations in new markets.
New start-ups and production milestones
In 2015, the Volkswagen Group implemented a total of 59 vehicle production starts in 27 locations across 14 countries; of these, 25 are new or successor product start-ups, while the other 34 start-ups were attributable to derivatives and product upgrades.
A significant event for the Volkswagen Passenger Cars brand was the start of production of the Touran replacement in Wolfsburg, which was launched in September. In April and May, there was a generation change for two models at once at Volkswagen Commercial Vehicles at the Hanover and Poznan locations with the start-up of the T6 and the new Caddy. Production of the new A4 family began at Audi in May, initially with the saloon in Ingolstadt. This was followed by the A4 Avant in August and the start of production of the saloon in Neckarsulm in October. Production of the ŠKODA brand’s new Superb began in Kvasiny in March and production of the Combi began in June. In November, Bentley launched the Bentayga, thus adding an SUV to its product range. The SEAT brand’s whole Ibiza family received a product upgrade, as did the Porsche 911.
In addition to the numerous new production start-ups, the range of models with alternative drive systems was expanded through the addition of the natural gas-driven Caddy and the plug-in hybrid versions of the Q7 and Passat. Furthermore, production of the current models’ replacement products was started at the assembly locations in Malaysia, India and Russia.
At the engine and transmission plants, there was a large number of start-ups of new and more efficient powertrains in 2015, which also contributed to the expansion of local production facilities. For example, a new engine plant was opened in Kaluga, Russia, in summer 2015. The plant, which has an annual capacity of 150,000 units, manufactures the 1.6 liter EA 211 engine, which has been adapted to the market, for local supply of the Russian vehicle plants in Kaluga and Nizhny Novgorod. Volkswagen is thus expanding its industrial presence in Russia and fulfilling legal requirements for local value added. In São Carlos, Brazil, production of three- and four-cylinder TSI engines in the EA 211 series was started at the engine plant at this site. In the medium to long term, they will replace the previous generation produced there. In addition, the new W12 petrol engine for use in the new Bentley Bentayga has been produced at the Crewe location in the United Kingdom since the end of 2015.
The Volkswagen Group celebrated some important production anniversaries in 2015. In South Africa, production of the one millionth Polo was celebrated at the beginning of the year. At the end of April, the Taubaté location in Brazil celebrated the one hundred thousandth up!. The five millionth vehicle on the Group-wide MQB platform rolled off the production line in October. The number of these vehicles has thus doubled within a year. At the same time, ŠKODA produced the brand’s 13 millionth vehicle worldwide since joining the Group and the Kassel location celebrated production of the one millionth DQ500 dual-clutch transmission. In addition, there was a milestone in November, as the two millionth Caddy rolled off the production line in Poznan.
A production anniversary was also celebrated in China in 2015. The number of vehicles produced in China (SVW and FAW-VW) exceeded the 25 million mark in November.
Flexibility in production
The modular toolkits allow us to design our production sites to be flexible. They generate synergy effects that enable us to reduce capital expenditure and make better use of existing capacities. With these toolkits we have created the conditions for using the production sites for several brands at the same time, and are implementing these systematically in terms of plant capacity utilization. For example, the ŠKODA Kvasiny location in the Czech Republic will also produce a vehicle for the SEAT brand starting in 2016. Of the 40 passenger car locations, 19 are now already multibrand locations.
Another concept for volume flexibility is the “turntable”. This is used, among other things, to compensate for fluctuations in demand or in segment shifts. One such “turntable” is formed by Volkswagen’s sites in Emden (Passat), Zwickau (Passat and Golf) and Wolfsburg (Golf).
As the complexity of products increases, a factory must work at optimal capacity so as to continue manufacturing high-quality products that give customers maximum benefits at competitive prices. This is all made possible by the standardization of production processes and operating equipment at an early stage. The basis for this is consistent construction and design principles that are defined in the form of product standards. “Concept consistency” ensures that common design principles, joining techniques and joining sequences, but also installation and connection concepts, are applied in the brands’ development and production areas. The principle of concept consistency is a fundamental component of the creation of efficient logistics and manufacturing processes.
The Group’s production system
To help us become the world’s most powerful and most fascinating automotive production platform, we optimize and standardize our production processes. The Group’s value-driven, synchronous production system provides us with the necessary methodologies and instruments for this. Our goal is to establish the Group production system throughout the world at all brand and regional locations so as to achieve sustainable and continuous improvement.
We have already made substantial progress towards this. In the future, we will increase the attention we give to further strengthening the Group’s production system and increasing its presence. As a first step in this direction we are measuring the extent to which the methodologies and instruments are being implemented at the locations. The target/actual comparisons are used to identify fields of action. These are then defined in a project plan and worked through in a structured manner in the second step. As a synchronous company, we are including all business areas so as to systematically optimize processes.
We are creating and managing a global production and logistics network in the area of material and vehicle logistics, from the supplier to the assembly line and from the factory to the dealer and the customer. Logistics services are planned across all brands from a single source, managed and, when required, purchased via the “procurement of logistics services”. It is important to us to adhere to stable and uniform processes worldwide.
The Volkswagen Group’s automotive logistics are managed across all brands, locations and models. Enduring efficiency is a prerequisite for our competitiveness. We meet challenges of the Industry 4.0 with holistic optimizations, pioneering innovations, flexible supply streams and structures and an agile team.
Our brands, regions and plants are together designing the logistics of tomorrow in a digital automotive world and using new technologies. The massive rise in the availability of information is making processes from the supplier to the production plant to the customer more and more transparent. We use animated planning tools for designing factories and supply streams and have already implemented the tracking of loaded trucks by GPS. Our production plants work in an automated and digitalized manner with driverless transport systems in logistics.
In all this, the traditional logistics objective still applies: information, material and vehicles are to be in the right place at the right time in the right quality and quantity – at the optimum cost.
Environmentally efficient production
The Volkswagen Group has set itself the goal of reducing the levels of the five key environmental indicators of energy and water consumption, waste for disposal and CO2 and VOC emissions in production by 25% for each vehicle produced – starting from 2010 levels – by 2018. This objective applies to all of the Group’s production locations, derived from our ecological requirements for production processes that are anchored in the Group’s environmental principles. As the charts below show, we have already made considerable progress towards reducing all these key indicators.
The Volkswagen Group’s brands contribute to achieving these goals with their own frameworks that reflect the specific features of their corporate culture and their brand image. Volkswagen Passenger Cars and Volkswagen Commercial Vehicles have established “Think Blue.Factory”, Audi has its “ultra strategy”, ŠKODA calls its program “Green Factory”, SEAT calls its program “ECOMOTIVE Factory” and Bentley’s program is called “Environmental Factory”. Porsche has introduced “resource-efficient production”. Scania and MAN are giving their commitment to the environment the names “Blue Rating” and “climate strategy”, respectively.
We are encouraging close integration and communication between the brands worldwide in order to create synergies. Our environmental experts meet regularly in working groups; in addition, they train our employees on the topic of environmental protection. We record and catalog environmental measures in an IT system and make these available for a Group-wide exchange of best practice. In the reporting period, more than 1,900 implemented measures in the area of environment and energy were documented in this system. They serve to improve passenger car and light commercial vehicle production processes. These activities are worthwhile not just from an environmental perspective: they also lead to annual savings of around €65.9 million.
The following examples from the year under review show the extent to which the measures contribute to improvement of the production processes and achievement of the target values for the five key environmental indicators:
One important lever for reducing energy consumption is on-demand operation of all plants. At our Hanover plant, by switching from two paint dryers to one load-dependent operation we reduced energy requirements by around 8,000 MWh per year; this is equivalent to annual savings of around €200,000 and 1,700 tonnes of CO2.
We use recycling facilities at some of the Group’s locations. These process biologically precleaned waste water for reuse through the membrane process in order to reduce the consumption of fresh water. We brought a recycling facility on stream at the Salzgitter location in 2015. This facility processes half the plant’s waste water into recycled water and uses it to feed the central cooling tower. As a result of this measure, we save around 75,000 m3 of freshwater there annually; this is equivalent to around a quarter of the location’s needs.
Modernizing part of the smelter at the Hanover location enables us to save around €3 million off our annual energy and material costs and reduce CO2 emissions by around 7,000 tonnes per year. Reduced oxide formation will additionally cut our use of materials by 70% and, as a result, also the amount of waste to recycle.
A new application technology that enables material savings is being used in the paintshop at the Spanish location of Martorell. We can thus reduce solvent emissions by 80 g per vehicle and make cost savings of €951,000 per year.
We are also reducing our CO2 emissions through energy recovery, among other things. In 2015, MAN set up a heat recovery system at the ship engine test facility at its site in Frederikshavn, Denmark. In the reporting period, we recovered over 3,160 MWh of thermal energy, which we supplied to the municipal district heating system. This lowers the CO2 emissions by 835 tonnes.
The natural gas-driven combined heat and power plant that came on stream in Zwickau in 2014 also makes a contribution to reducing our greenhouse gas emissions. In 2015, it generated 36% of the energy requirements at the site. By generating our own energy, we reduced our CO2 emissions by around 19,100 tonnes and achieved savings of roughly €8.9 million.
In Pinetown, South Africa, we have installed a photovoltaic system covering 6,300 m2 and thus created the MAN brand’s first climate-neutral location and South Africa’s first carbon-neutral production site. With over 300 days of sun a year we are able to generate 810 MWh and thus not only completely supply the location, but also feed the surplus power into the public electricity grid.
KEY ENVIRONMENTAL INDICATORS IN THE VOLKSWAGEN GROUP1
Logistics contributes to the Volkswagen Group’s ecological orientation. For example, we analyze the entire transport chain in respect of CO2 emissions. The objective is to avoid transports or to shift to more environmentally friendly modes of transport and to reduce fuel consumption. We are working on measures and areas of action for optimizing the logistics processes across the brands.
In a system known as logistics process partner management, we are improving the pickup processes together with freight forwarders and suppliers in terms of cooperation, efficiency and capacity utilization in the transport network.
An important starting point for reducing CO2 emissions is the selection of the mode of transport. One of the most efficient options here is maritime transport. The Volkswagen Group is therefore involved in the Clean Shipping Network (CSN), an association of marine cargo owners, and is represented on its management board. With the aid of the Clean Shipping Index rating tool, members of CSN can compare environmental efficiency figures, for example the emissions of individual ships on particular routes. This allows the environmental footprint of maritime transport to be analyzed and reduced.
The successful use of alternative drive technologies is of decisive importance in environmental and economic terms. E-mobility, gas and hybrid drives, fuel cells or other novel fuels offer interesting problem-solving approaches that we are examining for future use. In maritime transport, for example, the use of liquefied natural gas (LNG) is being examined because neither airborne particles nor sulfur oxide (SOx) are emitted. In addition, nitrogen oxide and CO2 emissions are reduced.
The continuous increase in efficiency in container management also contributes to reducing emissions. Volkswagen has one of Europe’s largest pools of load boards in Europe – for example for pallets or containers. The Group’s container management continuously works on improving the packing density, weight and folded volume of new load boards and on optimizing the transport routes for empty container shipping. In the design and manufacture of new load boards, we endeavor to use recyclable materials. As a result, plastic small load boards turn completely into recyclates that can be reused in new small load boards.
Last but not least, noise pollution is also taken into account when analyzing logistics processes. In 2015, among other things, the rail wagons from TOUAX were incorporated into the Volkswagen rail network. The use of modern technology – especially the composite brake pads – allows noise when braking to be reduced by more than 75%.