1938-1988. Volkswagen's Golden Jubilee ~ VOLKSWAGEN AG Annual Report 1987

The Supervisory Board and the Board of Management of Volkswagen Aktiengesell­ schaft present the Annual Report 1987 with their compliments. This version of our Annual Report is a translation from the German original. However, it does not include the financial Statements of Volkswagen AG and their explanatory notes. The German text is authoritative.

Wolfsburg, May 1988 Key Figures Table of Contents

Volkswagen Group VOLKSWAGE N AG Page Change Change 1987 1986 % 1987 1986 %. , Supervisory Board 6

I 43,199 Safes DM million 54,635 1 52,794 + 3.5 1 41,134 + 5.0 Board of Management 7 Vehicfe Safes units 2,773,613 2,757,793 + 0.6 ; 1,978.440 11.926,652 + 2.7 Report of the Supervisory Board 8 Production units 2,771,379 2,776,554 - 0.2 1.473,780 11.509,439 - 2.4

average - 129,028 Management Report: Volkswagen AG and Volkswagen Group 9 W orkforce over year 260.458 I 276.459 5.8 1 126,354 + 2.1 Capital Investments DM million 4,592 6,371 -27.9 3,532 4.469 -21.0 Economic Trend in the Fiscal Year 1987 9

Additions to Leasing and Rental Assets DM million 3,318 I 2,738 - + 21.2 - J - Research and Development 12

Cash Flow DM million 4,874 4,285 + 13.8 1 2,989 [ 2,516 + 18.8 Sales, Capital Investments, Result 12 Depreciation and Write-down DM million 3,291 2,948 + 11 .6 2.014 r 1,521 + 32.4 Development in the Current Year and Prospects 16 Depreciation on DM million 1 - Leasing and Rental Assets 1.490 1.491 - 0.1 - -1 Further Information about the Fiscal Year 18 Net Earnings DM million 598 580 + 3.1 494 485 + 1.8 Finance 18 Dividend of Vo:kswagen AG DM million I 306 306 -i of which on Shares and Holdings Chart 22 Ord1nary Shares DM million 240 240 - Preference Shares DM million 66 66 - Companies within the Volkswagen Group 26

Europe 26 The number of statt and the financial All percentages are based on non­ North America 50 figures for the AUTOLATINA companies rounded figures. Figures in brackets Latin America 52 as a joint venture between Volkswagen concern the previous year. Africa 56 AG and Ford Motor Company, Dearborn, Asia 59 USA. have been taken into account in the consolidated figures pro rata on the Motor Sport 62 basis of Volkswagen's 51 % holding. The production and unit sales figures for the AUTOLATINA companies relate to the SEAT - a contribution to Europe 64 Volkswagen models only. Financial Statements of the Volkswagen Group 81

Notes on the Financial Statements 84

The Volkswagen Group in Figures 1978- 1987 92

2 3 70

60 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 New passengar car registrations (1978- 100%)

Development of passengar car registra­ tions in West Germany, Spain and Eu­ rope, 1978 - 1987

The new Passat. Design studies from three angles.

4 5 Supervisory Board Board of Management

Dr. jur. Klaus Liesen (57), Essen Jann-Peter Janssen (43). Norden Changes on the Supervisory Board : Dr. rer. pol. Carl H. Hahn (61) Claus Borgward (49) Chairman Chairman of Works Council Chairman Ouality Assurance Chairman of the Board of of Volkswagen AG Dr. rer. pol. Hans Friderichs (56) (since January 1, 1982) April 11, 1980 Management of Ruhrgas AG Emden Plant Frankfurt Member of the Board of Management July 2, 1987 *) April 9, 1986 Former Federal Minister from May 1, 1964 Kari-Heinz Briam (65) March 24, 1981 to July 2, 1987 to December 31. 1972 Personnel and Social Matters Franz Steinkühler (50), Frankfurt Dr. jur. Otto Graf Lambsdorff (61) (Director of Labour Relations) Deputy Chairman Düsseldorf Helmut Kramer (56), Frankfurt Senator h. c. Horst Münzner (63) October 1, 1978 Chairman of the Metalworkers Union President Trade Union Secretary to the Executive Deputy Chairman July 2, 1987 Deutsche Schutzvereinigung für Committee of the (since January 1. 1982) Prof. Dr. techn. Dr. med. h. c. Ernst Fiala Wertpapierbesitz e. V. Metalworkers Union Purchasing and Logistics (59) (German stockholders' association) May 14, 1986 to July 2, 1987 Member of the Board of Management Research and Development Josef Bauer (48). lngolstadt July 2, 1987 since January 1, 1969 February 1, 1973 Member of the Works Committee Hans Mayr (66). Frankfurt of AUDI AG Walther Leisler Kiep (62). Frankfurt Former Chairman of the Metalworkers Dr. jur. Peter Frerk (57) July 2. 1987 Businessman (lnsurance) Union Legal matters, Auditing and from March 3, 1976 to July 1. 1982 February 10, 1984 to July 2, 1987 Economics Peter Birk (50). Frankfurt and since January 26, 1983 December 7, 1971 Trade Union Secretary to the Hans L. Merkle (75), Stuttgart Executive Committee of the Klaus Peter Mander (45), Wolfsburg Chairman of the Supervisory Board · Dr.-lng. E. h. Günter Hartwich (52) Metalworkers Union Deputy Chairman of the Joint of Robert Bosch GmbH Production July 2. 1987 and Group Works Council July 9, 1974 to July 2, 1987 July 1, 1972 of Volkswagen AG Birgit Breuel (50), Hanover March 25, 1985 Walter Neuert (62), lngolstadt Dr. rer. pol. Werner P. Schmidt (55) Minister of Finance of Lower Saxony Chairman of Joint Works Council Sales October 10, 1978 Karl Heinrich Mihr (52). Kassel of AUDI AG August 1. 1975 Chairman of Works Council July 5, 1977 to July 2, 1987 D.rjur. F. Wilhelm Christians (65) of Volkswagen AG Dieter Ullsperger (42) Düsseldorf Kassel Plant Karl Gustaf Ratjen (68). Frankfurt Controlling and Finance Member of the Board of Management November 27, 1972 Lawyer August 1. 1987 of Deutsche Bank AG October 31, 1975 to July 2, 1987 July 12, 1971 Gerhard Mogwitz (54). Hanover Chairman of Works Council Toni Schmücker (66), Bergisch Gladbach Changes on the Board Walter Hiller (55), Wolfsburg of Volkswagen AG Former Chairman of the Board of Management: Chairman of the Joint and Group Hanover Plant of Management of Works Council of July 5, 1977 Volkswagen AG Dr. jur. Wolfgang R. Habbel (64) Volkswagen AG July 1, 1982 to July 2, 1987 AUDI AG April 9, 1986 Dr.-lng. E. h. Günther Saßmannshausen January 1, 1979 to December 31, 1987 (57). Hanover Walter Hirche (47), Hanover Chairman of the Board of Dr. rer. pol. Rolf Selowsky (57) Minister for Economic Affairs, Management of Preussag AG Finance and Business Administration Technology and July 2, 1987 May 6, 1982 to March 13, 1987 Transport of Lower Saxony September 18, 1986 Dr. rer. pol. Otto Schlecht (62) Bonn-Duisdorf Albert Hoffmeister (59), Wolfsburg Undersecretary of State in the Federal Senior Executive of Volkswagen AG Ministry for Economic Affairs July 5, 1977 August 3, 1973

Hans-Günter Hopp~ (65). Berlin Dr. rer. pol. Albert Schunk (46), Frankfurt Former Member qf the Berlin Senate Trade Union Secretary to the Executive July 9, 1974 Committee of the Metalworkers Union July 5, 1977

Dr. rer. pol. Hans Tietmeyer (56). Sonn Undersecretary of State in the Federal Ministry of Finance July 2, 1987

*) This date indicates in each case since when the person has been a member of the Supervisory Board.

6 7 Report of the Supervisory Board Management Report: Volkswagen AG and Volkswc1gen Group Economic trend in the fiscal year 1987

The Supervisory Board has been kept At the same time the Deputy Chairman all the employees in the Volkswagen World economy still showing growth mobile industry experienced a new re­ regularly informed by the Board of Ma­ of the Supervisory Board, Herr Hans Group for the work they have performed cord year with a production output of nagement about the trend and situation Mayr, and Herr Dr. Hans Friderichs, Herr with a great sense of responsibility. The growth of the world economy con­ 14.6 million vehicles and further raised of the Company, about planned corpor­ Helmut Kramer, Herr Hans L. Merkle, tinued in 19B7 with restraint World its share of world automobile production ate measures and the development of Herr Walter Neuert and Herr Toni On March 24, 1988 the Federal Republic trade reacheld a growth rate of 4% as a to 31 %, particularly as a result of pro­ Group strategy. Measures requiring the Schmücker ceased being members of of Germany sold its 20% holding in the result of the high imports by West Euro­ duction cutbacks by US-American Supervisory Board's prior approval by the Supervisory Board of Volkswagen capital stock of Volkswagen AG in the pean countrues and Japan. There was manufacturers. Domestic production by law or under the Company's Articles of AG. The Supervisory Board would like to amount of DM 1,200 million (ordinary growth in gross national product in virtu­ Japanase manufacturers was stagnant Association were discussed in detail at express its gratitude to all the members shares). the shares being placed via a ally all the industrialised countries. The at a high Ievei of 12.2 million units but meetings of the Supervisory Board prior leaving for their meritorious collabora­ consortium of 75 national and interna­ events which occurred on the interna­ saw a 4% rise taking exported sets of to resolutions being passed. Based on tion. tional banks. ln accordance with § 12 of tional monev markets during the fourth knocked-down vehicle components into the oral and written reporting by the the Articles of Association of Volks­ quarter of the year, however, demon­ account. Board of Management the Supervisory The Federal Republic of Germany re­ wagen AG in conjunction with § 101 sub­ strated once· again the unstable and Board has been able to advise and lieved Herr Walther Leisler Kiep of his section 2 of the Stock Corporation Act hazardous constitution of the world eco­ ln West Germany, the largest European monitor management. office as of July 2, 1987 and delegated the two members of the Supervisory nomy. They took place against a back­ manufacturer, a total of 4.6 million pas­ Herr Dr. Hans Tietmeyer to replace him Board of Volkswagen AG nominated by ground of continued foreign trade imbal­ senger cars and commercial vehicles The financial Statements submitted by on the Supervisory Board in accordance the Federal Republic of Germany, Herr ances and still unsolved financial prob­ (+ 1 %) came oft the production lines in the Board of Management for Volks­ with § 12 of the Articles of Association Dr. Otto Schlecht and Herr Dr. Hans lems in some countries. 1987. wagen AG and the Group as at Decem­ in conjunction with § 101 subsection 2 of Tietmeyer, announced that they are to ber 31, 1987 along with the Manage­ the German Stock Corporation Act. As a relinquish their positions at the close of ln the USA clomestic demand showed Volkswagen Group - ment Report for Volkswagen AG and the result of the rotational elections to the the Annual Meeting of Stockholders on only slight e:

8 9 Management Report: Volkswagen AG and Volkswagen Group

The Group manufactured the following numbers of each model: 2.4 %. ßy contrast, the Volkswagen divi­ sion of AUTOLATINA suffered a 34.4% Passenger cars 1987 1986 drop in sales in the markets it seNes, the total amounting to 256,854 vehicles. Golf 896,847 876,772 Audi 80/90 290.298 179,648 Structural improvements Passat 267,363 351,639 within the Group Polo 232,158 214,508 Jetta 228,214 274,627 During the phase of restrained world Ibiza 160,907 121,526 economic upswing the structural uphea­ Voyage 121,118 69,961 val in the world automobile industry has Audi 100/200 118,117 157,711 accelerated and thus brought about Goi 63,057 69,798 keener competition. The main factors Panda/Marbella 56,893 36,879 have been the penetration by modern Malaga 37,653 41,292 manufacturers from low-wage countries Scirocco 23,013 32,964 and further efforts in the direction of Beetle 17,166 46,633 collaboration and concentration on the Audi Coupe/quattro 11.412 17,666 part of all manufacturers. ln North Am­ Other passengar cars 18,968 35,350 erica Japanase manufacturers have also continued building up extra production Capacity for passengar cars, partially Commercial vehicles with the aim of exporting to Europe. The Volkswagen Group pursued its en­ Commercial 145,380 161,712 deavours to strengthen the Group in the Heavy van (LT) 23,221 20,825 .... fiscal year 1987 . Trans/Terra 18,238 18,444 Visit of the President of the Stile Commissi<)n for Mechanical E.ngineering of the People's Republic of China, Zou Jiahua, in Wolfsburg Voyage pick-up 15,304 14,028 contribution towards bolstering the to solve the difficult tasks of 1987 in a The unsatisfactory utilisation of produc­ Volkswagentrucks 6-22 t 11,677 15,245 economic Situation. reasonable manner. tion capacity at the American assembly Golf pick-up/Caddy 10,906 14,694 plant in Westmoreland, Pennsylvania, is Volkswagen-M.A.N. trucks 6-9 t 2,908 Group staffing adjustments Our special thanks go to the manage­ compelling us to phase out production Other commercial vehicles 3,469 1,724 ment teams at the subsidiaries and all in 1988. ln future the Golf and Jetta The Volkswagen Group emplloyed a total the executives in West Germany and models will be imported from West Ger­ of 260,458 worldwide on an annual av­ abroad for their great sense of commit­ many and Mexico. This will seNe to Average production per working day for the individual Group erage for 1987. i.e. 16,001 ernployees ment. optimise worldwide manufacturing ca ­ companies was: or 5.8% less than the previous year. The pacity within the Group's interlinked pro­ I West German part of the Group showed We honour the memory of all members duction system. Vehicles per day a slight increase by 0.5% to 169,997 of staff and friends of the Company who have passed away. 1 employees, whilst staff at the foreign To secure our commitment in South Am­ VOLKSWAGEN AG 1 5,480 subsidiaries fcll by 15.7% to 90,461. erica the Volkswagen Group has been SEAT S.A. 1,816 Apart from a reduction in Group staff it Volkswagen Group No. 1 1 working on a partnership basis in the AUDI AG 1 1,797 in Europe for the third time 1 was also the merger of the Brazilian and joint venture AUTOLATINA with the Ford Autolatina in Brazil , 1,279 Argentinian manufacturing companies of 1 Motor Company since January 1, 1987. Volkswagen Bruxelles 928 , Not including knocked Ford and Volkswagen which had an ef­ ln Europe the Volkswagen Group deliv­ Against a background of difficult econ­ Volkswagen of America 384 down vehicles deliv­ fect. Volkswagen has a 51 % holding in ered 1,982,678 Volkswagen, Audi and omic conditions the aim of the coopera­ Volkswagen de Mexico 258 ered within the Group; the joint venture AUTOLATINA. SEAT vehicles to customers in 1987, tion is to maintain the strong market po­ Volkswagen of South Africa 190 AUDI AG: not including which was a new sales record (+ 7.5%). sition in this region and simultaneously Autolatina Argentina 85 Porsche 924/944 The average number of staff at Volks­ achieving a 15.1% (14.7%) share of the contain risks. lmproved exploitation of wagen AG was 129,028. a rise of 2.1 % passengar car market and thus consoli­ resources will boost competitiveness, and just above the previous year's Ievei. dating its position as leading manufac­ as has been confirmed by initial results. Materials management in the The Group's volume of purchasing saw turer of automobiles in Europe for the worldwide interlinked system a worldwide increase of 1.9% to DM Acknowledgement third consecutive year. lt meant that the To extend the range of vehicles at the 37.8 billion. At Volkswagen AG demand to staff Iosses in the North and South American Hanover commercial vehicle plant we The close collaboration with our 35,120 showed an 8.7% increase to DM 23.5 regions as a consequence of various in­ are planning a cooperative agreement suppliers all over the world continued in billion in the light of the increased de­ The Board of Management would like to fluencing factors were thus virtually off­ with the Toyota Motor Corporation. 1987 to guarantee a smooth supply to mand for more upmarket vehicles. DM thank all employees in the Volkswagen set. From 1989 onwards a pick-up vehicle in the production plants and implementa­ 16.8 billion was accounted for by pur­ Group for the high Ievei of commitment the one-tonne payload category is to be tion of the investment programme on chases of raw materials and supplies, to their work. lt would also like to thank Worldwide sales of vehicles by the manufactured under licence. Volks­ schedule. The materials and compo­ semi-finished and finished products and the works councils for their cooperation Volkswagen Group amounted to wagen has not yet been represented at nents delivered complied with the re­ DM 6. 7 billion was due to the purchase and. ~ense of responsibility. Trusting and 2,739,883 units (- 0.9%). Volkswagen all in this segment of the market. cognised high standards of the Volks­ of capital goods and seNices. With this POS1t1ve collaboration betwee:n corporate AG delivered 2,201.829 Volkswagen and wagen Group both in terms of technical high volume of purchasing the Volks­ ~anagement and the bodies represent­ Audi models to customers in the mar­ Ievei and quality. wagen Group again made a major mg the workforce have made it possible kets it seNes. which is a further rise of

10 11 Management Report: Volkswagen AG and Volkswagen Group

Research and development

Research and development activities in­ dicate the potential which is employed to secure the future of a company. The Volkswagen Group spent DM 1.9 billion on research and development last year. which represents a 5% increase on the previous year. Volkswagen AG spent DM 1.2 billion (+ 5 %) which was the largest part.

Automobile manufacture is being increa­ singly dominated by the use of new types of materials and the increasing ut­ ilisation of electronics in the fields of ve­ hicle safety, performance. economy and comfort. Last year the emphasis of aims was on resaarehing new drive technolo­ gies. using computer-aided simulation models for examining vehicle and mate­ rial behaviour and in the further develop­ ment of Iew-poiiution engines. ln deve­ loping new models the focus was on the Passat successor.

Sales, capital investments, result

Another increase in sales

The positive sales situation. necessary price adjustments and the continuing trend towards more upmarket and hence higher-priced vehicles and features led to another increase in the Volkswagen Group's sales, that is. a Volkswagen AG's sales came1 to DM Investment programme The increase in tangible assets was par­ 3.5% rise to DM 54.6 billion. Further­ 43.2 billion and were 5.0 % above the continued as planned ticularly due to the development and ex­ more. in addition to the income from Previous year's figure. The proportion tension of our vehicle and assernblies Ieasing and rental, the effect was also accounted for by foreign sales was The competitiveness and safeguarding programme as weil as modern isetion of feit for the first time of the proceeds 52.6% (55.8%). of the market position of the Volks­ production facilities. from the sale of used assets of Ieasing wagen Group are more than ever da­ and rentat companies being included in pendent on how successful it is at ln West Germany investments by the the amount of approx. DM 1.2 billion. economically implementing new tech­ Volkswagen Group amounted to DM Domestic sales at DM 22.5 billion nologies both in the automobile as a 4,324 million; the proportion accounted showed a 19.7% increase and more product and in its manufacture. lt is also for by foreign countries came to DM than managed to offset the 5.5% dec­ of decisive importance to optimise capi­ 268 million or 5.8%. The additions to line in foreign sales which amounted to tal deployment, to train and motivate Ieasing and rentat assets. which are no DM 32.1 billion. The proportion account­ staff and thus to improve their produc­ Ionger shown under capital investments, ed for by foreign sales fell from 64.3% tivity. amounted to DM 3,318 million, that is, to 58.7%. 21.2% above the previous year's figure To meet the high requirements involved. owing to the expanding Ieasing and ren­ The setbacks abroad were mainly due the Group investment programme was tat business. A major contribution was to lower sales in North and South Amer­ continued at a volume of DM 4,592 made by the subsidiaries V.A.G Leasing, ica and the much lower value of the (6,371) million. Capital investments in V.A.G France and interRent. American dollar. The influence exerted tangible and intangible assets amounted by the dollar also affected the transla­ to DM 4.430 million; after the consider­ During the year under report Volks­ tion of sales figures for our South Amer­ able additions in the previous year DM wagen AG invested a total of DM 3,532 ican companies because the currencies 162 million was invested in financial as­ million. DM 3,067 million of which was in those countries are closely re lated to 1985 1986 1987 sets. accounted for by tangible and intangible the price of the dollar. Oevelopment of sales of Volkswagen AG (OMmillion)

12 13 Management Report: Volkswagen AG and Volkswagen Group

I / •.....

1,000 1985 1986 1987 Capital investments {DM million)

Early Sketches for the new Passat saloon assets and DM 465 million by financial Group result The distributing, financing and Ieasing/ The unsecured foreign exchange items million to reserves. perm its proposal to investments. Investments in tangible at previous year's Ievei rental companies in the Volkswagen which had resulted in connection with the Annual Meeting of Stockholders of assets particularly related to the Passat Group returned a profit. the fraudulent manipulation of currency payment of a dividend of DM 10 per DM successor and the extensive modernisa­ The financial Statements of the Volks­ dealings have now been settled. DM 50 ordinary share. Taking the DM 5.63 tion and automation involved. A total of wagen Group and of Volkswagen AG for ln the North American market the Group 471 million of the provisions totalling tax credit per DM 50 share into account. DM 830 million was spent on this. the fiscal year 1987 were prepared in companies showed various trends. DM 473 million, which had been creat­ eligible holders of ordinary shares will accordance with the regulations of the Whilst Volkswagen Canada again made ed in the 1986 financial Statements to be entitled to a total of DM 15.63. Each Another major area was the develop­ new accounting legislation. a Profit, Volkswagen of America showed cover the loss,. were utilised. preference share attracts DM 1.00 extra ment of new gearboxes. Through intro­ a negative result owing to the heavy dividend and thus a total of DM 11.00. duction of modern production methods For the fiscal year 1987 the Volkswagen drops in sales, the increasing Ievei of Proposed cotntinuity in dividend Together with the tax credit of DM 6.19, such as the flexible body shell produc­ Group shows a result of DM 598 million competition and the structural measures each eligible shareholder will receive a tion and the full-scale production of which is 3.1 % up on the previous year. introduced. Volkswagen AG has returned net earn­ total return of DM 17.19 per DM 50 pref­ large plastic parts of the outer skin there The main contributor was Volkswagen ings in the amount of DM 494 {485) mil­ erence share. have been improvements in the quality, AG with a surplus of DM 494 million. T~e earnings Situation at the Latin Am­ lion. which. atter transferring DM 190 flexibility and economy of production. compared with DM 485 million in 1986. encan subsidiaries was characterised by the still difficult parameters. lnadequate Additions to financial assets consisted The companies manufacturing in Europe gov7rnment price permits. simultaneous chiefly of injections of capital in the achieved positive financial results owing Partlai deregulation of prices for pro­ Proposal on appropriation of net earnings available for distribution: AUTOLATINA group, Volkswagen de to the favourable economic Situation in ducts for further processing and the Mexico and interRent Autovermietung the automobile industry - with the ex­ over-valuation of the national currencies The Board of Management proposes that the net earnings available for distribution GmbH, the purchase of more shares in ception of the SEAT group which is still led to a negative result for AUTO­ of Volkswagen AG be appropriated as follows: a domestic sales centre, the setting up showing a loss. although it did manage LATINA. At Volkswagen de Mexico it of the Lisanne Investments N.V. and an to significantly reduce the loss com­ ~~s not only the general economic con­ Dividend distribution on subscribed capital of improvement in the capital structure of pared with the previous year as planned. dltlons which had a detrimental effect DM 1,500 milllion 306,000,000 DM the joint venture Shanghai-Volkswagen but also a two-month strike. so this Automotive Company, Ltd. company showed a loss for the year. of which: on ordinary shares 240,000,000 DM By con~rast. Volkswagen of South Afri­ on preference shares 66,000,000 DM ca. wh1ch again managed to take an Balance above-average share of the expansion {carried forward) 1,605,864 DM of the domestic automobile market. returned a profit. Net earnings available for distribution 307,605,864 DM

14 15 Management Report: Volkswagen AG and Volkswagen Group

Development in the current year and prospects

The modest growth in the world econo­ my is not expected to flatten out during the first half of 1988. However, unfor­ seeable influences are resulting from foreign trade imbalances, exchange rate risks with the American dollar and from the financial markets. The American economy is receiving additional impetus on account of the boost in export activ­ ity. As far as Japan and the West Euro­ pean economies are concerned. includ­ ing West Germany, the economic trend will again be dependent on private con­ sumption, whereby the Japanese econ­ omy will show a higher rate of growth because of the !arge reserve in domes­ tic demand. On the other hand, damp­ ening influences could originate from the reduction of exports due to the de­ valuation of the dollar.

After five years of upward movement the automobile industry in Europe is now approaching the peak of its econ­ omic cycle. Backed up by a favourable trend in real incomes and new Volks­ wagen models, the vehicle sales of the Volkswagen Group in this region will again take a positive course. lnternation­ alisation of our sales promotion will also be a contributing factor.

ln the automobile Ieasing and rental bu­ siness we intend to place the activities of interRent and Europcar, the subsidi­ ary of the Belgian Ieisure and travel company Compagnie Internationale des policy will depend more than previously Wagons-Lits et du Tourisme S.A., on a We assume that. unless there is an un­ on implementing advances in productiv­ common European footing. foreseen significant deterioration in the ity. With Volkswagen, Audi and SEAT we Situation on the world economy, the shall continue to meet the many differ­ ln the North American market we ex­ Volkswagen Group will again in 1988 be ent challenges on the basis of dynamic, pect sales to be even more difficult in able to maintain the high sales and pro­ long-term strategies in order to further the light of the structural upheaval in the duction figures of the previous years by strengthen the position of the Volks­ offering a convincing and wide range of automobile industry and the ever in­ wagen Group. creasing competition. ~odels. Owing to the constant changes m the conditions under which we com­ ln Latin America we are working under pete in the international markets, our conditions which make it difficult to plan ln all the other markets in which the activities even in the short and medium Volkswagen Group is represented there term. Nevertheless, demand is beginn­ are likely to be increases in sales in Wolfsburg, March 15, 19 ing to stabilise at a low Ievei. The 1988. This includes Japan, where we change in the restrictive price approvals intend to further intensify our working policy for motor vehicles on the part of together with the Japanese Volkswagen the Brazilian government also contri­ and Audi importer Yanase in order to butes to the improved earnings situa­ strengthen distribution. The aim is to tion. lt is now possible again to set take better advantage of market poten­ prices at more realistic Ieveis tial.

17 16 Further Information about the Fiscal Year Finance WKN 7664o3"~ Stück 10 The financial Statements of Volkswagen Current assets remained virtually con- Stück 10 stant and the increase originated from Developmetnt of short-term liquidity of the Volksw agen Group (in DM million) AG and the Volkswagen Group for the fiscal year 1987 were prepared for the fixed assets which rose by 12.5% to first time according to the new account­ DM 19,479 million. This reflects the high ing legislation which came into effect on Ievei of capital investments in tangible assets, particularly for the new Passat January 1, 1986. The presentation of the Additions to fixed assets financial Statements for the previous ye­ ("Quantum" in the United States) at the - 4,430 Emden plant, and an enlargement of the and intangible assets ar and of the tables derived from them Additions to financial assets - 162 fleet of Ieasing vehicles. has been adjusted accordingly. The Additions to Ieasing and rentat assets -3,318 Statement of Earnings was based on 184 The proportion of the balance-sheet Decrease in inventories + the cost of sales method. Fiscal depre­ lncrease in long and medium-term ciation which exceeded the Iimit im­ total accounted for by fixed assets receivables - 1,003 posed by commercial law was no Ionger amounted to 44.2 %, compared with Use of funds - 8,729 deducted from fixed assets but shown 41.5% in 1986. The rise in current as­ as special item with an equity portion. ~ets to DM 24,582 million was only min­ tm al though and this caused their pro­ Stockholders' equity ratio portion of the total to fall from 58.5% + 598 to 55.8%. Net earning:s matches international Ieveis Depreciation of fixed assets, write-down of financial assets and disposal of assets minus write-ups + 3,291 lnventories were lower but receivables, The course of business during 1987 was Depreciation and disposal of Ieasing including other current assets, were up also reflected in a rise in the balance­ and rentat assets + 2.470 on the previous year, whilst liquid funds sheet total for the Volkswagen Group. lncrease in provisions for pensions remained at a high Ievei. Total assets rose by DM 2,349 million to and similar Obligations + 595 DM 44,061 million, which corresponds lncrease in special items with The change in total capital was chiefly to a rise of 5.6 %. an equity portion + 374 due to the further increase in stockhol­ Changas in reserves not affecting liquidity + 17 ders' equity by almost one billion (DM Current op1erations + 7,345 991 million) to DM 12,938 million. Apart from the special items with an equity Portion in the amount of DM 2,212 milli­ an, which are regarded as stockholders' Dividend payments to Stockholders of equity, consolidated reserves also saw Volkswagem AG and minorities in 1987 - 307 an increase of 7.7% to DM 8,496 milli­ an. The proportion of the balance-sheet lncrease in long and medium-tmm liabilities + 1,140 total accounted for by stockholders' lncrease in other items + 285 equity in line with international Ieveis Financial transactions + 1,118 improved again by 0.8 percentage pornts to 29.4 %.

Accordingly the proportion accounted for Change in lliquidity by outside capital feil from 71.4% to - 266 70.6 %, whereby within the due dates position structure we managed to achieve a shift from short-term liabilities to medium­ term liabilities.

Favourable balance-sheet ratios

The key balance-sheet ratios for the Dec. 31 Dec. 31 V?lkswagen Group again remained at a 1987 1986 Change ~~g~ Ievei in 1987. Despite the substan­ tralmcrease, with 100.8% coverage, we 8,553 - 418 Recet- Liquid funds 8,135 were abte to finance fixed assets entire­ 364 62 vables 9,403 8,675 Securities 426 + ly with stockholders' equity and long­ Short-term receivables term outside capital. 7,162 7,437 - 275 LIQUid Short-term and financial assets Short-term liiabilities 8,561 8,917 17,184 17,549 liabilities funds The favourable balance-sheet structures and undetermined liabilities 17,184 17,549 + 365 are also reflected in our short-term li­ qu!dity: Liquid funds plus short-term re­ 1987 1986 Change in cervables and loans in relation to short­ 266 financial funds - Structure of the consolidated balance sheet (DM million) term outside capital was 91.5% (93.2%). 19 Finance

Sources (DM million)

1987 1986

Sales 43,199 41,134

plus other income 2,735 2,461 less expenditures 35,192 33,820

Added value 10.742 9,775 ..,."... other operatlng ex pense and 6,109 4,499 come flnancla Distribution of added value 6,048 4.453 results - ----f-----11 Most of the added value, DM 9,525 mil­ lion or 88.6 %, was distributed to staff. 48,526 46,746 Cost of Sales The tax payments of Volkswagen AG amounted to DM 639 million represent­ ing a 6.0% share of added value paid to the State. ln the past fiscal year credi­ tors received DM 83 million (DM 66 mil­ lion) so their proportion increased by 0.1 1987 1986 of a percentage point to 0.8 %. Structure of the consolidated Statement of earnings (DM millton) Of the remainder of added value DM 189 million or 1.8% was transferred to Financing of capital Added value analysis reserves in order to strengthen the investments out of cash flow of Volkswagen AG Company's equity base and secure its future. Tagether with the profit brought The still high Ievei of capital tnvestments Sales of Volkswagen AG amounted to torward from the previous year DM 190 was entirely financed by self-generated DM 43,199 million, an increase of 5.0% million was transferred to reserves. The funds (106.1 %) and the cash flow of the or DM 2,065 million on the previous ye­ total amount of dividend, DM 306 milli­ Volkswagen Group increased by 13.8% ar. After including other income totalling an, to be paid to the Stockholders of to DM 4,874 million as against the pre­ DM 2, 735 million and deducting ex­ Volkswagen AG is the same as the pre­ vious year. penditures of DM 35,192 million, which vious year's figure. were mainly due to cost of materials. Stable earnings situation the added value of Volkswagen AG Distribution came to DM 10,742 million (+9.9%). (DM million) The favourable sales sttuation of the Volkswagen Group was also reflected in This result reflects the economic per­ 1987 9,525 to staff the structure of the Statement of Earn­ formance of Volkswagen AG and consti­ 639 to the State ings. Although manufacturing costs in­ tutes its contribution to West Germany's 83 to creditors creased by 3.8% to DM 48,526 million gross national product. lt is distributed 189 to the Company owing to the continuing demand for to stockholders. staff. the State, credt­ 306 to the Stockholders more expensive vehicles and features, tors and the Company itself in compli­ 1986 8,736 to staff they remained - despite a weaker dol­ ance with legal and contractual Oblig­ 489 to the State lar rate - virtually unchanged at 88.8% ations. 66 to creditors of sales proceeds, which are 3.5% up. 178 to the Company Consequently the gross profit saw a 306 to the Stockholders 1.0% increase to DM 6,109 millton

Compared with the previous year the results from ordinary business activities increased slightly to DM 1,610 million. After deduction of the lower extraordi­ nary loss and of taxes, the Volkswagen Group showed net earnings totalling DM 598 millton (DM 580 million).

20 The Maior Companies within the Volkswagen Group December 31, 1987

~------E_u_ro~pe______~ ==== Overseas ~ VOLKSWAGEN AG ~ubsc ribe~ capital DM 1,500,000,000 .--...... lant locat1ons: Wolfsburg, Hanover. Kassel, Emden, Salzgitter, Brunswick

Sociedad Espaiiola de AUTOGERMA S.p.A. Volkswagen of America, Volkswagen de Mexico, Autom6viles de Turismo. Verona, lta ly lnc. S.A. de C.V. Brunswick S.A.. Madrid, Spain ~ Lit 90,000,000,000 Troy, Mi., USA Puebla/Pue., Mexico 100% ~ t- DM 300,000,000 Ptas 80,000,000.000 - us $ 242,000,003 - Mex $ 225,678,987,000 100% 75% - ·100% 100% -V.A.G France S.A. V.A.G Leasing GmbH Seat Kredit Financiera SEAT. VW Credit, lnc. Volkswagen Comercial, Paris, France Brunswick Bank GmbH S.A., Madrid, Spain Troy, Mi., USA S.A. de C.V. FF 50,000,000 DM 300,000,000 Brunswick Ptas 6,207.390,000 ~ us $ 100,000 Puebla/Pue., Mexico 100% 1- ~ t- 100% DM 3,000,000 100% 100% Mex $ 80,000,000 100% ..... 100% r-- Seat Leasing GmbH V.A.G Transport GmbH Volkswagen Bruxelles ~A:G Financement S.A. Volkswagen Canada lnc. Volkswagen Leasing, ans. France Brunswick Wolfsburg S.A. Toronto, Ontario, Canada S.A. de C.V. ,. FF 20,961.400 DM 2,000,000 Brussels, Belgium Can $ 500,000 Puebla/Pue., Mexico DM 1.000,000 77.5% 1-- - t- 100% 100% bfrs 1,925,000,000 - 100% Mex $ 30,000,000 21 ·1% HOLAD 100% 100% ~ ·4 % VOLKSWAGEN AG

r-- V:A.G Sverige AB interRent VOTEX GmbH Coordination Center Vorelco Ltd. Volkswagen of Autovermietung GmbH Dreieich Volkswagen S.A. Sodertälje, Sweden Toronto, Ontario, Canada South Africa (Pty.) Ltd. DM 1,000,000 Brussels. Belgium i skr 84,000,000 Can $ 6,700,000 Uitenhage, C.P. Harnburg 33.3% ~ ~ 1-- DM 45,000,000 100% bfrs 2,000,000,000 - 30% South Africa 100% 100% 70% HOLAD R 9,362,650 ...... 100% r-- V.A.G Stockholm AB interRent S.A. TAS Tvornica Autolatina Volkswagen of Nigeria Stockholm, Sweden Brussels, Belgium Automobila Sarajevo Comercio, Neg6cios e Ltd., Lagos, Nigeria Vogosca, Yugoslavia Skr 22,500,000 Participac;:öes Ltda. N 23,000,000 bfrs 11,000,000 100% t- 1-- 1-- 100% Din 3,593,355,321 Säo Paulo. Brazil 40% 49% Cz $ 15.426,230,149 ...... 51%

interRent Trucks S.A. Autolatina Argentina Shanghai-Volkswagen Brussels, Belgium S.A., Buenos Aires Automotive Company, bfrs 1,250,000 L- Argentina L- Ltd., Shanghai, China 100% A 5,510,000 RMB 255,000,000 51% 50%

0 Producing Companies BDistributing Companies Other Companies

22 23 Salient Figures of Maior Subsidiaries and Affiliates

Producing Companies Sales Vehicle Sales Production Capital Investments Workforce

DM million DM million Change Units Change Units Units Change DM million DM million Change Dec. 31 Dec. 31 Change 1987 1986 % 1986 % 1987 1986 % 1987 1986 % 1987 1986 %

AUDIAG 11,366 9,908 +14.7 414.461 351,321 +18.0 ;---__ 443,067 383,519 + 15.5 730 889 -17.9 39,325 39,843 1.3 ------SEAT S.A. 4,879 3,821 + 27.7 433,510 347,147 + 24.9 ;;--___ 406,391 338,548 + 20.0 103 1,263 -91.8 24,895 23,591 + 5.5 ------~ 2,726 2,536 + 7.5 209,662 192,753 + 8.8 ~ 209,662 192,753 + 8.8 49 128 -61.4 5.422 5,636 3.8 ------Volkswagen Bruxelles S.A. TAS Tvornica Automobila Sarajevo 456 377 + 21.1 29,928 32,145 6.9 ;----___ 30,575 30,940 1.2 6 10 -39.7 3,116 3,006 + 3.7 ------~------Volkswagen of America, lnc. 5,8151) 8,766 -33.7 237,627 285,013 -16.6 c:---_ 66,508 84,331 - 21.1 239 559 -57.2 5,528 6.448 -14.3 ------~------~------3 AUTOLATINA 4,692 -24.5 345,8933 409,977 -15.6 :------_ 341,909 ! 411,055 -16.8 414 -58.8 30,03421 48,766 -38.4 ------~· Volkswagen de Mexico, S.A. de C.V. 1,280 - 12.7 54,561 66,806 - 18.3 :---___ 48,722 71,554 -31.9 182 163 + 11.9 13,365 14,007 - 4.6 ------Volkswagen of South Africa (Pty.) Ltd. 866 645 + 34.3 44,963 37,993 + 18.3 ~ 44,167 38,836 + 13.7 17 8 X 6,811 5,830 + 16.8 ------~------Volkswagen of Nigeria Ltd. 37 118 -68.5 1,851 2,744 -32.5 ...... _ 2,123 3,747 -43.3 5 -89.8 1,370 2,046 -33.0 ------~------~------~------~· ~~------~------Shanghai-Volkswagen Automotive Company, ltd. 343 251 + 37.1 11 .038 8. 471 + 30 3 11 .000 8 .500 + 29.4 71 46 + 53.9 2,087 1,911 + 9.2 --- I .

Distributing Companies

AUTOGERMA S.p.A. 3,266 2,665 + 22.6 175,810 147.457 + 19.2 2 2 - 6.7 333 317 + 5.0

V.A.G France S.A. 2,514 + 23.0 155.488 130,927 + 18.8 ...... _ 344 269 + 27.9 996 995 + 0.1 ------~------· ~----~------V.A.G Sverige AB 1,006 834 + 20.6 42,232 36,255 + 16.5 -- 112 107 + 4.0 365 351 + 4.0 ------~------~------7------Volkswagen Canada lnc. 1,039 1,294 -19.7 42,803 45,579 - 6.1 r------27 28 - 3.5 731 691 + 5.8 I

Other Companies

V.A.G Leasing GmbH 2.161 11 1,120 + 93.0 2.477 1,793 + 38.2 328 297 + 10.4

interRent Autovermietung GmbH 338 + 64.0 291 224 +30.3 1,570 1,547 + 1.5

V.A.G Kredit Bank GmbH 236 215 + 9.6 7 4 + 70.3 335 302 + 10.9

31 1 lnct. proceeds from disposal of used assets 2' in line w1th the 51% holding Only Volkswagen models

24 25 Companies within the Volkswagen Group Europe

Leading position in Europe quality. This expansion, to which the en­ Share of domestic ln West Germany the Volkswagen Group Since February 1987 all the Audi vehi­ consolidat ed tire range of products contributed, is the market increased again achieved a sales increase of 6.0% to cles, and since November all the Volks­ result of systematic implementation of 915,060 vehicles, which was weil above wagen passengar cars fitted with a pe­ in Europe the buoyancy of the automo­ our three-marque strategy: Volkswagen, Enhanced by the renewed rise in real in­ the average for the industry. The market trol engine, were available w ith a catal­ bile industry continued in 1987. As a Audi and SEAT. comes and by virtual price stability, priv­ share accounted for by our three ytic converter as standard. The Volks­ result of the sharp rise in private con­ ~te demand (particularly the increasing marques thus saw a rise to 30.1 % wagen Group, which was the market sumption, new passenger car registr­ The models worthy of special mention lnterest in low-pollution vehicles) contri­ (28.8%), of which 22.2% (23.1 %) were Ieader in 1987 with a market share of ations amounted to 11.9 million vehicles are the Golf, which has been the best­ buted to the fact that the automobile in­ Volkswagens. Audi and SEAT managed 29.6% of all the new reduced-pollution (+ 6.3%), a new record Ievei. selling vehicle in West Germany since dustry remained a major pillar of overall to improve considerably on their market vehicles in West Germany, demonstrat­ 1975 and in Europe since 1983 and is economic development in West Ger­ positions at 7.5% (5.5%) and 0.4% ed its sense of responsibility towards The Volkswagen Group was able to de­ still enjoying growth rates, as weil as many. (0.2 %) respectively. Of the new regist­ the environment in its range of pro­ rive above-average benefit from the ex­ the exceptionally successful new range rations of Group models 81.4% were ducts. Moreover, many customers driv­ pansion in the automobile business on of Audi 80/90 models. New passenger car registrations low-pollution vehicles. ing vehicles without a catalytic conver­ account of its attractive range of models amounted to 2.8 million vehicles, that is, ter have .taken the opportunity of having in terms of technical features and 2.7% above the previous year, thus one fitted.

1,000 -

New registrations of low-pollution 500- passenger ca rs in West Germany - Proportion of Volkswagen Group

0- As far as commercial vehicles are con­ 1983 1984 1985 1986 1987 cerned, Volkswagen was able to achieve Production of the Volkswagen Group in Europe a growth rate of 3.3% to 64,237 units sold in the category up to a licensed ----~--- weight of 6 tonnes and thus maintain its A major contribution has been made by attaining a new peak. This development clear Iead over competitors with a mar­ the Spanish subsidiary SEAT, whose Was characterised by a 3.7% rise in ket share of 39.3% (40.7%). However, rises in sales even exceeded high ex­ ~ales of domestic makes. At the same since demand for commercial vehicles pectations both in the domestic market tnne, the number of rival foreign makes saw a considerable decline, particularly and in other European countries particu­ Was stagnant (+ 0.1 %). in the US market, short-time working larly on account of the successful Ibiza became necessary at the commercial model. Spain thus became the second vehicle plant in Hanover. most important foreign market in Europe for the Volkswagen Group after ltaly, followed by France and Great Britain.

1985 1986 1987 Overall passenger car market in West Germany c:J Proportion of Volkswagen Group

26 27 Europe: Research and Development VOLKSWAGEN AG

VOLKSWAGEN AG - looking to the The Passat Variant received a unique Passat- ln terms of its characteristics the Passat As a typical Audi model the Audi 80 has future with the new Passat award in the year of its model change. a new dimension in driving has remained a typical representative of a marked similarity to the Audi 100 and. 70 car journalists from all over Europe the advanced. trend-setting Volkswagen with its definite sportiness. constitutes ln the markets it serves, Volkswagen AG and the readers of "Auto-Zeitung· voted Since its launch in 1973. that is. 15 years philosophy and constitutes the alternative a vehicle for the individualistically in­ delivered 1,782,831 Volkswagen vehicles this model the best family car, whereby ago, there have been 4.2 million Passat to the successful Audi 80/90 models. clined sporting driver. (- 0.3%) to customers, 1,619,529 pas- it was particularly the high Ievei of con- cars made. a figure which speaks for it­ self. With regard to spaciousness, comfort On account of its enormaus spacious­ and convenience the newly developed ness and the great variability of its inte­ The new Passat, in which it is only the Passat is setting new Standards in the rior the new Passat is an excellent fami­ name which is connected with the old middle range. This has been possible al­ ly saloon with a high Ievei of technical model, is designed to Iead on from this so as a result of implementation of the functionality - a car for a wide custom­ accomplishment and moreover gain transverse engine concept which has al­ er group, in line with the Volkswagen new customers. Volkswagen has em­ lowed us to take full advantage of this marque. Pioyed its entire wealth of ability and design in terms of spacious interior. know-how in developing and designing The new transverse engine concept per­ the new generation of Passat and the To make the Volkswagen and Audi ranges mits an extremely low-profile engine result it is now presenting is a vehicle more different from one another we have bannet, whereby the Passat has been Which meets the highest standards of not only introduced different engineering given a new front without radiator grille. engineering, quality, economy, comfort but also different Styling in order to address The exceptionally aerodynamic design is and minimum environmental pollution. different groups of potential customers. also continued in the rounded shape

senger cars (+ 0.1 %) and 163,302 light venience and comfort. the refined qual­ commercial vehicles (- 3.6%). lt also ity and the high resale value, as w ith all handles the worldwide ·distribution for Volkswagen products, which were high­ Audi. lighted. The first place of the Golf GTI in the compact sports saloon class served ln West Germany deliveries of Volks­ to round oft Volkswagen's success. wagen passenger cars to customers amounted to 624,273 (-2.0 %), which ln addition the Golf was the undisputed was virtually the same as the previous victor in its class of the readership year's high Ievei. lt was the Golf with competition "The best cars in the world" 380.756 units (+ 1.1 %) which again far in the magazine ·auto motor und spart". and away exceeded the sales figures of all the other Group model ranges Sales of the Polo showed an above-average rise of 7.1 % compared with the total of new passengar cars registered.

ln the West European volume markets Volkswagen deliveries to customers again rose by 2.8 % to 674.218 vehicles. Further successes were achieved above all in the !arge markets of ltaly, Spain. France and Great Britain.

29 28 Research and Development

The running gear is also state-of-the-art. A key aspect for the customer will be Naturally a completely new design of and the large flush windows. so that the !he conversion to 14-inch wheels (15- the fact that the car is so easy to ser­ vehicle also calls for a new engine pro­ vehicle achieves the low drag coefficient mch on request) and larger brakes, an vice and maintain. On the Passat this gramme. lt ranges from the 1.61itre/ of 0.29 The Passat is thus one of the extended wheelbase, a wider track and advantage has been achieved by em­ 53 kW (72 bhp) carburettor engine with most streamlined cars in its class, with the newly designed track correcting ploying the modern, low-maintenance non-regulated catalytic converter considerably reduced fuel consumption torsion beam trailing arm rear axle engineering of the new Volkswagens. through to the high-tech engine of the and noise Ievei. ensure exemplary road holding and lt ensures reliability and safety in opera­ 2.0 litre 16-valve model providing 100 safety. Another contributing factor is the tion with only a minimum of mainten­ kW (136 bhp) and a top speed of 206 anti-lock braking system (ABS) which is ance plus a reduction in running costs km/h. lt also includes the 1.8 litre/66 kW offered as an option for all the versions brought about by easy-to-service weil (90 bhp) engine with regulated catalytic of engine. arranged assemblies. converter and monojet injection system or, a 1.8 litre/79 kW (107 bhp) fuel injec­ The high Ievei of running gear technol­ The extensive guarantee package for tion engine with DIGIFANT (an electroni­ ogy is complemented by a newly deve­ the new vehicle includes: cally controlled ignition timing/fuel mix­ I?Ped manual gearbox, modern centra­ - 1 year of freedom from defects with­ ture preparation system). The 1.6 litre/ h_sed electrics, a luxury heating and ven­ out any km Iimit 59 kW (80 bhp) turbo diesei engine with tllation system, and air conditioning if - 3 years' guarantee on paintwork charge air cooling and increased per­ required. - 6 years' guarantee against rusting formance provides a sporty economic through. alternative to the petrol engine.

I I

30 Research and Development

Product progress - After methanol had been examined in yardstick of innovation the past in various additives for conven­ tional fuel, an electro-hybrid drive, com­ As a result of research and development prising a decoupling 37 kW diese! en­ work we were again able to introduce gine and a 5 kW electric motor was product improvements which have led developed in collaboration with the to an 1ncrease in safety and a reduction Bosch company as a potential alterna­ in environmental pollut1on throughout tive and put to test in a Golf. the entire range of models. Verbrennungs­ The engine and the motor are controlled The permanent Volkswagen all-wheel motor via automatic couplings so that at low •syncro· drive has proved successful as speeds, and therefore in city traffic, it is a superior drive system. At the heart of mainly the electric motor which propels this concept with slip-sensitive power the vehicle. The output necessary for distribution, the viscous coupling, Volks­ accelerating and achieving higher velo­ wagen has been a pioneer. This reliable cities is created by the diese! engine. technology • still being offered on the Fuel consumption in urban areas can Commercial and on the Golf, is now al­ thereby be reduced to 2.4 litre per 100 so available on the Jetta and soon on km, thus reducing the already low nox­ the Passat. ious substance emission of the diese! engine by half. Noise emission is also Alongside the Scirocco and the Golf, the reduced. As a pioneering concept the Jettais now also available with the suc­ electro-hybrid drive was awarded the cessful 16-valve engme. Thus this model special prize for environmental protec­ also offers increased performance with­ tion in the context of the "Grand Austri­ out any need for extra engine capacity, Jetta fia!J ' 'l!OII'Oü an Automobile Prize·. with improved fuel utilisation and less environmental pollution. As for the Pas­ Allradantrieb Large-capacity computer sat syncro and the Commercial series, to simulate tests model upgrading has included the intro­ duction of a fully electronic anti-lock ln mid-1987 a computer was put into braking system which meets our high operation which is opening up new di­ requirements in terms of quality and mensions in the simulation of tests. lt is safety in the Golf and Jetta classes too. a system which can work up to 200 times faster than conventional industrial computers.

The fields of application of the new computer include the simulation of air flow past vehicles, behaviour in crashes, engine research and testing vehicle de­ sign.

Vehicle development and research is to be accelerated by the use of optimised computer models. The advantage of such modern methods of computing is that they can be used at a time long be­ fore paper drafts, bodywork tools or even prototypes exist.

Further development Iew-poiiution engines still constituted ~ ~P component for the engine range The electro-hybrid drive - of the engine range a major part of our development work. G- Olkswagen is the G-charger. a trend·setting concept d c~arger engines combine compact ln the engines sector work was focused A !arge role has also been played by im· hes,gn and high performance. They A key item of research has for years on meeting the worldwide exhaust proving engines now in series produc­ P~ve a high Ievel of efficiency and dis­ been the development of alternative emission regulations. Although many of tion and developing new engines and ra~y a very high torque over the entire drive systems with which fuel consump­ our engines already provide figures gearboxes. ln the case of the petrol en­ ge of engine speeds. tion and emissions are reduced and much less than the noxious substance gine vehicles the use of DIGIFANT tech­ therefore a contribution is made tow­ Iimits which are low in some countries. nology, which serves to optimise air/tuel ards relieving the environment. the further reduction in exhaust emis mixing and ignition, was extended. sions and the extension of our range of

32 ______~------~.. ._ ------~------33 Production

Restructuring production plants, ~nformation processing new production technologies ln production

With new production methods and mea­ T~ boost productivity a CAD (Computer sures to improve the Organisation of A1ded Design) system was developed in work, major steps were taken again in our design departments which intro­ 1987 to maintain competitiveness at all ~uced automated design of deep-draw­ Volkswagen AG's plants. lng tools.

Investment focused on the restructuring We also began implementing a CAD of the Emden plant for the new Passat. Programme for factory planning which The now achieved Ievei of flexibility per­ Supports rationalisation of the planning mits us to convert production to differ­ Process and thus makes a contribution ent vehicles in a minimum space of towards reducing investment time. time. This means that we can respond rapidly to market Situations and improve Further computer-aided means of pro­ utilisation of production capacity. We are duction are used at our new toolmaking thus not only taking account of increas­ section in Brunswick. Machine tools ing requirements in terms of profitability, connected up via ONC (Oistributed Nu­ productivity and product quality but also merical Control) are directly linked to the of an improvement in work conditions control computer which processes con­ and environmental protection. trol data. thus optimising work proce­ dures. The new flexible body shell shop at Em­ den is designed in such a way that in an interlinked system of high-volume weld­ ing machines bodywork parts can be welded fully automatically. The combi­ nation of clamping and welding robots permits, within a short space of time, production of a different or a new model without any major capital investments.

A further step towards flexibility of pro­ duction is automation systems in as­ sembly. Automated gearbox assembly at the Kassel plant permits adaptability with regard to programme changes and continuous utilisation of equipment.

34 35 Quality Assurance Purchasing and Logisfies

projects make both the suppliers and Volkswagen more competitive and are therefore of mutual benefit.

Ouality knows no Iimits lt is a task of quality assurance, as the plines we have been able to apply in lmprovement in mat erial flow customer's advocate, to ensure that our Volkswagen's quality assurance a tech­ Ouality does not arise by chance, nor products meet the high quality expect­ nique which checks complete produc­ Together with selected suppliers, mate­ does it anse solely from the skill of a ations worldwide lt was therefore pos­ tion facilities for compliance with the rial fine control projects have been im­ craftsman, from functional design or the sible from the start to manufacture Po­ specified dimensions and shapes in a plemented which secure the supply of fraction of the time previously required. correct choice of materials. Ouality is los at SEAT in Pamplona at the same Ie­ our plants despite an increasing variety the result of collaboration between peo­ vei of quality to which the customers of of products and parts and reduce inven­ ple who have set themselves the aim of Wolfsburg production are accustomed. This new electronic method, also called tories both at the supplier's and at meeting the ever increasing require­ the theodolite measuring technique, im­ Volkswagen. ments of the market with rational Everywhere in the world Volkswagen proves quality and productivity at Volks­ means. quality is based on the same standards. wagen by reliable adherence to yet When production of the Passat was aims and principles. and even if the in­ smaller tolerances. Ouality control is al­ launched at the Emden plant it was pos­ struments differ according to local con­ so performed on the finished bodies by sible by selecting suppliers near the ditions, standards do not. A high Ievei of flexible measuring robots, which is a plant to set up a virtually inventory-less quality calls particularly for close colla­ further innovation. This technique will be or "just-in-time· supply of materials. boration between all those concerned, used worldwide. By synchronising the flow of production starting from research and development and materials with supplying companies through to our suppliers. and by having pre-assembled compo­ nents delivered to the assembly line in ln the manufacture of the new Passat in correct order the Emden plant operates Emden measuring methods are being almost without any inventory of its own. used which have so far only been appli Apart from reducing cycle time these ed outside the automobile industry, for projects also called for joint planning of example in the aircraft industry, in ship an improved communication system and building and in land survey work. By tak new quality assurance measures. Such ing a Iook at completely different disct-

36'------~------~------~------~------37 Environmental Profeetion

Environmental protection - Our efforts at environmental protection an unceasing quest are a never-ending process in which the latest findings of research are incorpo­ ln times of scarcer resources and in­ rated. We work closely with universities creasing competition, environmental and research institutes, for instance in protection is gaining more and more im­ the following fields: portance and is simultaneously becom­ ing a key corporate challenge. Volks­ - Cleaning waste air from paintshops wagen has tackled this challenge parti­ with microorganisms cularly by further restricting noxious emissions through improved methods - Avoidance strategies for special of production. waste materials

For example, the solvents escaping dur­ - Large-scale tests to improve sewage ing the drying process of sprayed vehi­ treatment. cles are burned in so-called •thermal in­ cinerators·. ln future we shall be largely These examples of activities pursued replacing solvents by water in this tech­ constitute, together with the measures nically elaborate and cost-intensive related to vehicles and places of work, method of air cleaning in order to fur­ Volkswagen's contribution towards pre­ ther reduce the Ievei of noxious sub­ serving and improving our environment. stances. To test the new techniques Volkswagen has set up a pilot paintshop in Wolfsburg which operates under seri­ es conditions.

A further point of emphasis in environ­ mental protection is at the Volkswagen power stations where until 1989 consid­ erable resources will be spent on im­ proving further the quality of air in the Wolfsburg region.

39 38 Report on Social Matters

Training at Volksw agen risen to 4,538. This has played a major trainees' pay were agreed upon for each Company pension scheme Participation in the role in relieving the Situation on the re­ training year and arevalid for the same suggestion scheme ln future the qualification of employees gional labour markets. Periods. On December 31. 1987 28,210 former will play a crucial role even more than employees of Volkswagen AG or their The suggestions Submitted by our em­ previously. and this is why educational Collective agreements The agreements also provide for a re­ surviving dependants received a com­ ployees increasingly serve to improve activities at Volkswagen concentrate on duction in the weekly working time as pany pension. As a result of the statu­ productivity, work procedures and work specialised follow-up training. One basic On April 1. 1987 the "Collective Agree­ of August 1. 1988 by 1 1/2 hours to 37 tory adjustment of pensions to take place conditions as weil as to increase prerequisite has been the setting up of ment for Social Security of Employees in hours. The training time was shortened account of the cost of living 10,792 per­ the quality of products. The successes a technology training centre in Brun­ the Case of Technical and Organisation­ by 1 1/2 hours to 38.5 hours a week as sons eligible for benefits received higher in these fields are a reflection of our swick in which six laboratoriss and train­ al Changes· took effect and is due to ot April 1. 1988. payments as of January 1. 1987. staff's sense of identification with the ing rooms are used to teach the specia­ run until March 31. 1992. This super­ Company and the aims of corporate lised fields of electrical engineering and seded the previous rationalisation agree­ ln December 1987 the "Collective At the beginning of 1987 a new pension policy. control engineering. ment from the year 1968. The new Agreement on Part-time Working" was scheme was agreed upon with the Joint agreement contains an improved protec­ concluded and came into effect on Jan­ Works Council. As of January 1, 1987 a After a construction period of 12 months tion of jobs (occupation and pay) in con­ uary 1. 1988. lt contains bargained gen­ reduced scale of company pension pay­ the extended training and communica­ nection with rationalisation investments eral arrangements and can be terminat­ ments will apply to new employees. tion skills centre "Haus Rhode" was re­ and provides for a suitable training of ed on October 31. 1990 for the first Pension payments remain unchanged opened. thus taking due account of the employees. also in the interests of the time. Among other things this agree­ for all members of statt employed at rising capacity requirements with regard Company. ment establishes a minimum average Volkswagen prior to this date. to follow-up training of our managers Working time of 20 hours a week for and junior managers. New collective agreements on working each month. This also ensures that part­ Early retirement scheme times and pay were concluded in May time jobs at Volkswagen AG are subject ln the field of vocational training the 1987 for the staff of Volkswagen AG. to the statutory social insurance scheme. As in previous years a so-called age-58 training courses were reorganised as a The new arrangements are valid for a scheme was used. This meant that result of a rearrangement of the indus­ period of three years and can be termi­ 2.405 employees were able to retire be­ 20_ trial metalwork and electrical trades and nated on October 31. 1990 for the first fore time. ln past years about 27,000 matched to suit oparational and produc­ time. They contain a percentage in­ members of Volkswagen AG's staff have 10_ tion procedures. Volkswagen AG has crease in pay for 12 months in each taken advantage of this scheme. filled 1,543 training posts in industrial case. in the years 1987 to 1989 from and commercial training. so the total November 1 by 3.7 %. by 2.0% and by o_ number of apprentices and trainees has 2.5 %. lncreases across the board for 1983 '84 '85 '86 '87

Suggestions submitted

The refurblshed tralnlng and eommunleatlon akills eentre " Haus Rhbde" Compared with the fiscal year 1986 the number of suggestions for improvement submitted rose by 4.9% to 49,737. The total amount of awards for ideas actual­ ly put into practice increased from DM 15.9 million to DM 17.5 million. The highest award of DM 100,000 was made in twenty individual cases.

40 41 Europe: AUDIAG

AUDI AG - ln West Germany sales amounted to Owing to the favourable sales situation The new Audi 90 - an example ln the quattro version the Torsen differ­ considerable increases in sales 212.455 vehicles (+37.8%). which was the company was able to boost produc­ of superb engineering ential now replaces the previously used much greater than the expansion of the tion by 15.5% to 443,067 units (includ­ and upmarket features intermediate differential, as already on The business trend at AUDI AG was market as a whole. The upward trend of ing 25,833 Parsehe models). which is the new Audi 80. The new differential particularly characterised by the suc­ Audi is also reflected by the 3rd place of the highest Ievei so far in the company's The new Audi 90 serves to close the regulates mechanically and steplessly cess of the two models Audi 80 and 90. the Audi 80/90 range of models in the history. ln August the six millionth Audi gap between the economic, compact the distribution of torque between the These vehicles were extremely weil re­ domestic registration statistics. ln other ~ehicle was completed since Auto Un­ Audi 80 and the spacious saloons Audi front and rear axles. Consequently the ceived in Europe so v.vorldwide deliver­ European countries unit sales amounted ron GmbH was taken over by Volks­ 100 and 200. With the powerful 2.0 litre/ axle with the greater road holding auto­ ies of Audis to customers rose by to 142,057 (+ 12.2 %) which was also wagen AG: lt was an Audi 100 quattro. 85 kW (115 bhp) or 2.3 litre/100 kW matically receives more power and 15.3% to 418,998 automobiles. weil above the previous year's figure. (136 bhp) five-cylinder engines and up­ thereby improves the behaviour of the As at December 31, 1987 the number of market features it constitutes the dy­ vehicle, particularly in critical situations. statt totallad 39,325 (-1.3 %), which namic alternative in the upper compact Was only slightly less than the figure for class. The new Audi safety system As of the fiscal year 1987 all the Audi the same time the previous year. quattro models are fitted with ABS as Standard. The excellent behaviour of At the Neckarsulm plant, models 924 these vehicles is thus backed up by a and 944 are being manufactured for maximum Ievei of active safety. Persehe AG. For 1988 ParseheAGhas Ordered about 4,000 vehicles less than At the beginning of 1988 the Audi 100/ in 1987 within the scope of the assem­ 200 series was significantly upgraded. bly contract which runs until December The new features adopted in the Audi 31, 1989. For this reason it has been ne­ 80/90 range, such as the "procon-ten· cessary to agree upon short-time work- safety system, are now available for this 1ng for employees involved in manufac­ model series too. This series also pres­ turing Parsehe vehicles. ents a newly designed interior and an extended set of basic features, includ­ As a result of the rise in vehicle sales ing height-adjustable safety belts and a and the continuing trend towards more five-speed gearbox as standard. The ~Pmarket features, sales saw a 14.7% Audi 100 was also fitted with a new rncrease to DM 11,366 million. Whilst 1.81itre/65 kW (88 bhp) base engine with there were increases in sales in West non-regulated catalytic converter as weil Germany and in the other European as a new five-cylinder 2.0 litre/85 kW rnarkets, decreases were suffered in the (115 bhp) injection engine and regulated North American market as a result of catalytic converter. On the Audi 200 the the low exchange rate for the dollar and "procon-ten" is also available for this output of the five-cylinder turbo engine dwindling total unit sales. model. This contribution by Audi to pas­ was raised to 147 kW (200 bhp). sive safety in road traffic has been lhe surplus achieved was transferred to awarded national and international For all the new vehicles registered in Volkswagen AG under the profit as­ prizes. Europe with fully galvanised bodywork surnption agreement. AUDI AG has been providing a 10-year warranty against bodywork perforation rusting since January this year and is thus setting new standards in large­ series production.

42 43 Europe: Europe: V.A.G Leasing GmbH, interRent Autovermietung GmbH V.A.G Kredit Bank GmbH, V.A.G Transport GmbH, VOTEX GmbH

V.A.G Leasing - interRent - V.A.G Kredit Bank - V.A.G Transport - and VAG Transport GmbH holds a 25% market leadership reinforced again successful in 1987 votume of business rose significantly positive earnings situation interest.

VAG Leasing GmbH again improved on interRent Autovermietung GmbH rents The favourable economic situation in the VAG Transport GmbHisaservice com­ its leading position in the German auto­ out passengar cars, vans and trucks to­ automobile industry and the increased pany operating worldwide which under­ VOTEX GmbH - considerable mobile Ieasing business delivering a to­ gether with its collaborating companies activities of VAG Kredit Bank GmbH led takes international sea, land and air expansion in domestic business tal of 124,500 vehicles to customers. via 1, 700 hire agencies in 61 countries. ~o an above-average expansion in lend­ transport operations as weil as forward­ The fleet of vehicles was increased by The fleet of rental vehicles, which has rng in West Germany and in segments ing, transhipment and stevedoring for The business activity of VOTEX GmbH 24.3% to 235,000. This expansive trend been constantly increased and matched of other European markets. This is also the Volkswagen Group and others. The comprises dealing in, developing and was particularly due to the continuing to demand in recent years, now totals reflected in an increase in the balance­ firm uses charter and scheduled carrier manufacturing specific accessories for growth in the private customer sector. about 85,000. sheet total, which was 16.4% up on the services. Volkswagen and Audi models. Previous year at DM 3,143 million. As a result of the favourable trend in bu­ ln West Germany the company again The company transported 539,346 auto­ ln 1987 the sales of VOTEX GmbH in­ siness, sales increased to DM 2,161 mil­ achieved a favourable position with With competitive credit facilities for mobiles, which was 4.6% less than the creased - mainly as a result of the con­ lion. The company returned a profit for around 11,500 rental vehicles. ln the rest V.A.G customers and a realistic, advan­ previous year, particularly owing to the siderable rise in domestic sales of vehi­ the year. of Europe business is handled by two tageaus financial service tailored to the drops in sales on the American conti­ cle accessories - by 11.4% to DM subsidiaries and a separate system of requirements of the VAG organisation, nent. A major share of the transport Op­ 127.6 million. At the sametime there To back up the selling activities of Seat interRent licensees. ln the North Ameri­ the. company has managed to improve erations was again accounted for by ve­ was an improvement in the financial Deutschland GmbH, Seat Leasing GmbH can market the company collaborates on rts position and make an important hicle parts. result. was formed on May 6, 1987 as a wholly­ with the Dollar Rent-A-Car System, lnc. contribution to increasing sales of Volks­ owned subsidiary of VAG Leasing wagen Group products. The business development at VAG GmbH. ln the light of the overall expansion in Transport was severely affected by the business the capital stock of interRent VAG Kredit Bank achieved a positive decline in the value of the dollar. Never­ was increased by DM 33.0 million to result in 1987 which was transferred to theless the company achieved a surplus DM 45.0 million by ploughing profits Volkswagen AG under the profit as­ which was transferred to Volkswagen back into the company. sumption agreement. AG under the profit assumption agree­ ment. interRent's 25% share in VAG The successful business development Transport was purchased by Volkswagen was reflected by a rise in sales volume. AG at the end of the year. For 1987 the company returned a profit. To intensify shipping business the car­ go-handling company Autoport Emden GmbH was formed on October 15, 1987

To support the sales of SEAT vehicles, Seat Kredit Bank GmbH was formed on '\Pril 15, 1987 as a wholly-owned subsi­ drary of V.A.G Kredit Bank GmbH.

44 45 Europe: SEAT S.A.

SEAT S.A.- ly exceeded the previous year's Ievei by and West Germany. ln fact deliveries to ed by the SEAT group was increased by previous year was sold. SEATs shares largest automobile manufacturer 26.7 %. ln the rapidly expanding Spanish customers in the German automobile 5.5% to 24,895 by the end of the year. in a company of insurance agents were in Spain automobile market with over one million market almost doubled. To intensify basic and follow-up training taken over by VW-Versicherungsvermitt­ new vehicles registered SEAT's sales in­ for the workforce a new training centre lungs-GmbH. The fiscal year 1987 was a year of prog­ creased by 21.9% to 123,980 units. ln Spain 59,039 Volkswagen and Audi was opened in Barcelona. ress for Sociedad Espafiola de Autom6- Nevertheless it was not possible to models were sold in addition to the Although SEAT S.A. is still showing a viles de Turismo, S.A. With the impres­ completely meet the brisk demand be­ SEAT vehicles, which represents an Due to the structural measures intro­ loss for 1987, it was much less than the sive upward trend in Spain, which is cause of production bottlenecks with 18.3% increase on the previous year. duced the company was able to signifi­ previous year because of the substantial now the fourth largest exporter of pas­ the Ibiza and the supply difficulties in­ cantly improve productivity. The number increase in productivity. senger cars in the world and ranks as volved, so the market share of SEAT ve­ At 406,391 vehicles manufactured of vehicles manufactured per employee sixth manufacturing country in the hicles receded to 11.3% (12.2 %). (+ 20.0 %) SEAT S.A. was again in 1987 at SEAT during the past two years rose world, SEAT managed to considerably the largest Spanish motor vehicle manu­ from 13.7 to 17.6. This is also an indica­ improve on its sales and production fi­ Exports saw a pleasing growth in sales facturer. 275,151 units (+ 18.7 %) were tion of the positive synergetic effects of gures. at 157,220 automobiles (+30.7%). The the SEAT products Ibiza, Marbella, Mal­ the collaboration between Volkswagen most important markets apart from ltaly, aga and Terra whilst 131,240 vehicles AG and the Spanish subsidiary. Deliveries of SEAT models amounted to where there was a 44.0% rise in unit (+ 23.0 %), of which 88,185 were suppli­ 281,200 vehicles and thereby significant- sales to 62.414 vehicles. were France ~d to Volkswagen AG's sales organisa­ To tighten up structures the business tJon, were Passat and Polo models activities of three Spanish financing manufactured under licence. companies were reorganised at the end of the year and merged with FISEAT. An Owing to the considerable expansion in insurance company which had already Production the number of statt employ- been excluded from consolidation the

46 47 Europe: Europe: Volkswagen Bruxelles S.A., TAS Tvornica Automobile Saraievo AUTOGERMA S.p.A., V.A.G France S.A., V.A.G Sverige AB

Volkswagen Bruxelles - TAS- AUTOGERMA - V.A.G France - ln reorganising the financing and Ieasing new production record another positive result in 1987 the most successful European distri­ sales at a new peak business in France these activities were buting company in the Group brought together under the subsidiary Owing to the continuing favourable de­ Production at TAS Tvornica Automobila Our French subsidiary V.A.G France S.A. VAG Financement. mand for the Golf Volkswagen Bruxelles Sarajevo saw only a slight reduction of ~t 171,504 Volkswagen and Audi deliver­ delivered 144,976 Volkswagen and Audi S.A. achieved a new production record 1.2% to 30,575 vehicles despite the dif­ las to customers AUTOGERMA S.p.A. models (+ 10.0 %) to customers, which V.A.G Sverige - of 209,498 units of this model (+ 8.7 %). ficult overall economic conditions in Yu­ surpassed the sales of the previous year was the highest annual sales figure market position improved ln order to attain this volume, it was ne­ goslavia. Of this total 15,837 units were considerably by 15.7 %. lts share of the since it came into being. lts share of the cessary to introduce a further increase destined for export to Volkswagen AG. Passenger car market in ltaly thus im­ expanding French passengar car market V.A.G Sverige AB managed to furt.her in production per working day from 834 proved to 8.4% (7.8 %). of which 7.1 % at 6.1 % mirrored the high Ievei of the improve on its leading position as the to 927 Golf vehicles. ln addition the ln Yugoslavia unit sales, including those (7 .0 %) was accounted for by Volks­ previous year. The most popular Group largest automobile importer in Sweden company assembled a total of 164 of imported vehicles, rose by 3.5% to wagen and 1.3% (0.8 %) by Audi. The model in France was again the Golf. during the past year, achieving a figure Volkswagen Iltis off-road vehicles in the 14,284 Volkswagen and Audi models. company was still the largest importer of 42.445 vehicles (+ 18.4 %). 35,787 year under report. Within the Volkswagen Group in Europe. ln 1987 V.A.G France again showed a passenger cars (+20.1 %) were deliv­ TAS showed a small surplus for the profit. ered to customers, which corresponds Volkswagen Bruxelles returned a profit. year. This success may be largely attributed to a market share of 11.6 %, compared not only to the Golf but also to the fa­ with 11.2% the previous year. ln the vourable reception of the Audi 80 and light commercials segment of the mar­ 90 ranges of models by the market, ket Volkswagensold 6,658 units With deliveries to customers more than (+9.8%). doubling. Of the Volkswagen marque 146,661 automobiles were sold VAG Sverige achieved a surplus for the (+ 9.2 %) and of Audi 24,843 (+ 79.3 %). year.

AUTOGERMA again returned a good re­ sult.

48 49 North America: Volkswagen of America, lnc., Volkswagen Canada lnc.

Slackening tendency in the Volkswagen of America - capital market in October 1987 via a Volkswngen Canada - nents (particularly based on aluminium) automobile industry successful launehing of the newly formed subsidiary, Volkswagen market position maintained under the Group's worldwide interlinked Volkswagen Fox Lease Finance Corporation. production system was enlarged accord­ ln the US automobile market registr­ Volkswa~1en Canada lnc. delivered ing to plan, whereby the current low ex-. ations of new passengar cars remained The slackening tendency in demand for As a result of the unsatisfactory utilisa­ 41,881 ve1hicles to customers and thus change rate of the Canadian dollar had a much lower in 1987 than the previous automobiles and price increases due to tion of capacity, the serious influence of just about maintained the previous ye­ favourable effect on supplies to Volks­ year's figure at 10,842,859 vehicles exchange rates brought about a reduc­ the weak dollar, high expenditure on ar's figuna (-3.0%). This was chiefly wagen AG. (-9.5%). lt was mainly the domestic tion in deliveries to customers of 15.9% rnarketing and provisions for the closure due to the success of the Volkswagen manufacturers who were hit by the to 233,027 vehicles at Volkswagen of of the Westmoreland plant now under Fox from Brazil. A market share of 3.9% Volkswagen Canada showed a surplus weaker demand whilst particularly Japa­ America. lnc. Of this total, 191,705 vehi­ way, Volkswagen of America showed a (3.9 %) a!gain meant the company was for the year. nase vehicles produced in America re­ cles (-11.7 %) were sold via the Volks­ loss. positioned fourth among automobile im­ corded a considerable rise in sales of wagen division, whilst the Audi division porters. 64.3 %. ln the subcompact car sector delivered 41,322 vehicles (-30.9 %) to Transfer of production the increasing competition from Far East customers. At the Barrie plant in Ontario the capac­ suppliers and American makes pro­ Production at the Westmoreland assem­ ity for manufacturing parts and compo- duced in Korea or Mexico had a drastic Positive impetus for the Volkswagen bly plant in Pennsylvania, which Volks­ effect. The slackening tendency of the models emanated particularly from the wagen had commenced in April 1978, automobile industry in conjunction with Volkswagen Fox imported to the US had been undertaken against a back­ an excess of vehicles available led to market from Brazil in the spring. Of this ground of constantly growing demand massive sales promotion campaigns compact class vehicle. with which for compact class vehicles. lt was espe­ from virtually all competitors to an un­ Volkswagen is returning to the lower cially the diesei engine versions of the precedented extent. price category, 40,176 units were sold to Golf which had enjoyed great popularity customers. At the beginning of Novem­ because of the low price of diesei fuel. Sales of passengar cars in the Canadian ber another range of models was market showed a slightly declining tend­ launched on the US market, the Audi Owing to the setting up of new produc­ ency (-2.6 %) du ring the year under re­ 80/90. tion capacity, chiefly on the part of Japa­ port. Whilst sales of vehicles manufac­ nase manufacturers, the pressure of tured within the country declined ln order to refinance its business VW ?Ornpetition increased during the ensu­ (-8.7%), deliveries of imported models Credit, lnc .. a wholly-owned subsidiary lng years. This was accompanied by to customers saw an increase of Volkswagen of America, issued bonds rnore and more fragmentation of vehicle (+10.4%). totalling US $ 150 million on the US classes which were simultaneously shrinking. Consequently utilisation of Production capacity at the Westmore­ land plant had become more and more unsatisfactory.

ln deciding to phase out production in Westmoreland at the end of the model Year 1988 the inevitable adjustment to the changed market conditions was cornpleted in November 1987. the South Charleston press shop having already ?een closed down in June 1987. To min- 1rnise the effects both for employees concerned and for the region, a redun­ dancy payments scheme was prepared Which includes severance pay scaled according to the length of an employee's Service. ln addition and backed by the 9overnment of the State of Pennsylva­ nia, Volkswagen is seeking a buyer for the Westmoreland plant.

50 ------~------51 Latin America: Latin America: AUTOLATINA Companies Autolatina Comercio, Neg6cios e Participa~öes Ltda.

Initial stabilising tendency in the AUTOLATINA - cooperation to AUTOLATINA in Brazil - Joint venture production had to be cut demand for automobiles secure the company's future distinct ri se in vehicle exports back owing to difficult domestic sales conditions and problems at the suppli­ ln Latin America the general economic The South American region will continue Autolatina Comercio, Neg6cios e Parti­ ers. Additionally production was im­ conditions have continued to deterior­ tobe a very important market for the cipa~öes Ltda. sold a total of 456.487 paired through labour disputes and a ate, although in Mexico slight stabilising Volkswagen Group on account of the units. Of these 326,237 models were temporary delivery stoppage in conse­ tendencies were evident. The automo­ still considerable potential for growth, accounted for by the Volkswagen quence of insufficient price approvals. bile industry too was affected by the dif­ despite many imponderables. ln line rnarque (-15.7 %) and 130,250 by Ford. Production of Volkswagen and Ford ve­ ficult economic conditions in this region. with this assessment the formation of hicles amounted to 453,848 units. the AUTOLATINA companies constituted With 177,653 passengar cars and light ln Brazil the economy was not only af­ an important step towards actively and commercials sold in Brazil (-43.6 %) At the end of 1987 statt totalled 50,858. fected by dwindling demand for auto­ expansively securing our future position Volkswagen achieved a market share of mobiles but particularly by the price ap­ in this region. 36.7 %. ln the truck market up to 22 t 3,784 million cruzados (DM 161 million) proval policy for motor vehicles which Volkswagen sales fell by 31.5% to 9,947 were injected into the joint venture to brought about legal disputes during the Their importance for the economies of units. This corresponded to a market strengthen its equity base. last quarter of the year. This conflict Brazil and Argentina, particularly for the share of 14.6 %. was resolved with the decision of the automobile industry, is manifested not Because domestic prices failed to cover Brazilian Minister of Finance of March 8, only by the streng market position By contrast, exports were boosted and costs and export sales fell as a result of 1988 which permits the entire automo­ achieved but also by the high number of carne to 147,912 Volkswagen and Ford the inadequate adjustment of the ex­ tive industry to pass on inflation-related jobs, including at dealers and suppliers, rnodels, although this was only possible change rate for the cruzado to the Am­ cost increases in retail prices. which are directly or indirectly depend­ at the cost of dornestic business. Volks­ erican dollar the company showed a ent on the Volkswagen/Ford joint ven­ wagen exports more than doubled and loss for the year which detracted from ln the Mexican automobile market de­ ture AUTOLATINA in both countries. arnounted to 138,637 vehicles. The the financial result of the Volkswagen mand was also on the decline owing to rnain contributing factor was the sup­ Group as a whole in proportion to the continuing disconcertion about the fu­ The successes achieved in bringing plies of the Fox to North America, com­ 51 % holding. ture economic trend. After a number of about the necessary reduction in costs rnenced in February 1987, the figure for years of an extremely weak demand for even during the first six months after the year being 73,937 vehicles. motor vehicles there was a certain the official launehing of AUTOLATINA amount of backlog demand in Argentina with close collaboration between the in 1987 and this led to a 14.0% increase two parent companies are characteristic in registrations of new passengar cars of the great potential of synergetic ef­ compared with the previous year. fects created by the cooperation.

52______------53 Latin America: Latin America: Autolatina Argentina S.A. Volkswagen de Mexico, S.A. de C.V.

AUTOLATINA in Argentina - 20,112 were Volkswagen models Volkswagen de Mexico - up. These capital investments were fin­ merger of vehicle production (-13.0 %) and 33,136 Ford models. market share sustained anced by injections of capital from Volkswagen AG totailing DM 118 miilion. in the year under report Autolatina Arg­ As at December 31, 1987 the company Volkswagen de Mexico, S.A. de C.V. entina S.A. sold 52,820 automobiles, employed a total of 8,032. delivered 58,734 vehicles to customers At Volkswagen de Mexico the further 19,656 Volkswagen (-14.8 %) and (-12.4 %) in the past fiscal year. Aided decline in sales, the rise in the prices of 33,164 Ford models. Volkswagen's share The negative result of Autolatina Argen­ by the favourable reception of the Golf imports due to substantial changes in of the increased number of new vehi­ tina S.A. during the fiscal year was and Jetta successor models launched at the value of the currency and the ef­ cles registered in Argentina feil from chiefly due to the non-recurring cost of the beginning of the year, the company fects of the industrial dispute led to a 13.6% to 10.3 %. merging the two companies Volkswagen managed to virtually maintain its share negative result. and Ford. However, in Argentina as weil of the passengar car market at 32.9% Autolatina Argentina S.A. was unable to a synergetic effect was already becom­ (34.2 %). For the light commercials there fuily participate in the expansion of the ing evident, demonstrating that we are was a 26.4% drop in sales, which to­ market because there were interrup­ on the right lines. tailed 7,347 vehicles. tions in production owing to the transfer of vehicle production from the San Justo As a result of unsatisfactory sales and plant to the plants at Pacheco and the two-month interruption of work in Monte Chingolo. Total production mid-year the company's production amounted to 53,248 vehicles, of which amounted to 48,722 vehicles and thus remained 31.9% less than in 1986. Sup­ ply of the Group's interlinked production system with engines and components during the strike period was maintained with no significant shortfalls. The size of the workforce feil by 4.6% to 13,365 employees.

To make best use of the cost-favourable location of Mexico and to meet existing export Obligations capacity for the inter­ linked production system was stepped

54 55 Africa: Volkswagen of South Africa (Pty.) Ltd.

Volkswagen of South Africa - ties of the employees on an equal basis Volkswagen of South Africa (Pty.) Ltd. further consolidation and developing local industry and the delivered 47,237 vehicles to customers of market position community with the aim of increasing (+30.6%) which represents a sales in­ the quality of life. This particularly app­ crease of more than market expansion Volkswagen has been active in South lies to the improvement in training and so its share of new passengar cars re­ Africa for over 30 years. Since the very social conditions of the non-white popu­ gistered improved to 19.9% (17 .4 %). beginning the corporate policy has been lation. the high Ievei of wages compa­ With the Golf and the Jetta the Volks­ characterised by furthering of the abili- red w ith the national average and the wagen marque also had the best-selling trusting collaboration with the trade uni­ range of models in the South African ons. market.

ln South Africa the economic process of ln line with the rise in unit sales produc­ recovery stabilised in 1987. For the mo­ tion increased to 44,167 units. This also tor industry as weil this meant an impro­ led to a 16.8% increase in the number vement in essential overall conditions. of statt to 6,811 employees. The positive trend is illustrated by the 17.3% increase in demand for passen­ Through its sales success and improve­ gar cars and light commercial vehicles. ments in productivity Volkswagen of South Africa was able to achieve a sur­ plus for the year.

56 57 Africa: Asia: Volkswagen of Nigeria Ltd. Shenghai-Volkswagen Automotive Company, Ltd.

Volkswagen of Nigeria - the end of the year the size of the work­ ~n Asia the Volkswagen Group is pursu­ Shanghai-Volkswagen - Japan - significant a positive result force had been reduced by 33.0% to lng the aim of improving its position in positive development rise in Group sales 1,370 employees. one of the most important markets, Ja­ The still difficult economic Situation in Pan, and at the same time contributing ln expanding production of the joint ven­ ln the slightly expanding Japanese auto­ Nigeria had a detrimental influence on Volkswagen of Nigeria showed a slightly from the outset to the setting up of a ture Shanghai-Volkswagen Automotive mobile market the Volkswagen Group the demand for automobiles, which re­ positive result. domestic automobile industry in the big Company, Ltd., tagether with three Chi­ managed to considerably boost deliver­ mained at the very low Ievei of the pre­ market ot the future, the People's Re­ nese associates. considerable progress ies to customers by 33.0% to 40,512 vious year. Deliveries by Volkswagen of public ot China. Following this strategy, was made. The production volume of vehicles and thus achieved an improve­ Nigeria Ltd. to customers therefore feil further progress was made with regard the Santana was 30.4% up on the pre­ ment in market share to 1.3% (1.0 %). to 1,574 passenger cars (-29.0%) and to our long-term positioning in this high­ vious year to 10,470 vehicles. ln addition Volkswagen and Audi remained by far 747 light commercials (-14.2 %). potential, high-volume region. Shanghai-Volkswagen assembled 499 the leading foreign marques. Here too Audi 100 cars. ln line with the increased the Audi 80, sales of which amounted Owing to the high Ievei of inventories all output, unit sales of our models in the to 5,456 units, proved to be particularly manufacturers were compelled to close Chinese domestic market rose by successful. Deliveries of the Santana their plants for lengthy periods. ln the 30.3% to 11,038 vehicles. models manufactured under licence by case of the Nigerian Volkswagen com­ the Nissan company in Japan rose by pany work was discontinued for a total Statt numbered 2,087 (+ 9.2 %) which 22.4% to 8.426 automobiles. of almost three months so production, reflects measures to match production. which amounted to 2,123 vehicles, was 43.3% less than the previous year. By To finance the capital investments the shareholders passed a resolution to in­ crease capital stock in two stages by a ..I:.~AIJII'I•Jlll•tl'll'§" total of 190 million renminbi, which cur­ $JI$*1114tt'Jittt.!ll"~ rently corresponds to about DM 80 milli­ an. Volkswagen AG's share of the first portion, which was paid in in November 1987, amounted to 47.5 million renminbi (DM 21.5 million).

Shanghai-Volkswagen again achieved a positive result for the year.

1:. ~ * ~ i\ 11 ~u 't~ ·•J @ SHANGHAI VOLKSWAGEN~*

58 59 Other Maior Subsidiaries and Affiliates Worldwide lnterlinked Supply System December 31, 1987 of the Volkswagen Group

I. Distributing Companies Holdtng (%) Field of activity

VAG Vertriebszentrum GmbH 63.4 Supplying VAG retailers with automobiles, spare parts and accessories of the Volkswagen Group. und Co Südbayern KG including service, advice and training Munich and 10 other V.A.G sales centres 26.0 each in West Germany

WESER-EMS Vertriebsgesellschaft mbH, 81.3 Wholesaling in the Bremen sales reg•on Bremen (and consolldated subsidiaries)*)

II. Other Companies

1. West Germany

VAG Marketing Management 100.0 Providing tra1ning and follow-up traimng for proprietors and managers within the VAG sales orga· Institut GmbH, Brunswick*) nisation

VW KRAF1WERK GmbH, Wolfsburg*) 100.0 Generating electricity and heat at the combined heating and power Stations in Wolfsburg. Kassel and Hanover. as weil as supplying Volkswagen AG and others w ith energy

Deutsche Automobilgesellschaft mbH 50.0 Research and development work in the fields of electrical engineering and electrochemical storage Hanover*) systems

GmbH für ausländische Vertriebs­ 100.0 Holdings in various European MAN -\A:llkswagen commercial vehicle importers beteiligungen M.A.N.-Volkswagen Wolfsburg

VW-Wohnungsbau Gemeinnützige 100.0 Building, administering, modernising and maintaining housing at Volkswagen AG locations Gesellschaft mbH. Wolfsburg

VW-Siedlungsgesellschaft mbH 100.0 Building, purchasing and administering housing. business prem1ses and other structures at Volks· Wolfsburg*) wagen AG locations

VW-Versicherungsvermittlungs-GmbH 66.7 Handling insurance for the Volkswagen Group, acting as an insurance broker in providing all kinds + - Finished vehicles Wolfsburg of cover, including certain services + - CKD vehicles -Part sets VW-Gesellschaft für technische 50.0 Softwareresearch and development, consultancy services - Individual parts Datenverarbeitungssysteme mbH + - Assernblies Berfin + - Spare parts

IAV Ingenieurgesellschaft für Aggregate­ 50.0 Research and development work in the field of automotive engineering technik und Verkehrsfahrzeuge mbH Berlln

Innovationsgesellschaft für fort­ 20.0 Research and development of advanced production Systems, part•cularly for the automobile in­ geschrittene Produktionssysteme dustry in der Fahrzeugindustrie mbH. Berlin

Volkswagen Bordnetze GmbH, Berlin 50.0 Wiring Ioom production for the Volkswagen Group

2. Other countries

HO LAD 100.0 lnvesung 10 domestic and foreign companies, portfolio and property management Holding & Administration AG Basle, Switzerland

Volkswagen International 100.0 Raising of long-term capital on behalf of Volkswagen Group companies Finance NV., Amsterdam, Netherlands (and consolidated subsidiaries)

*) There is a profit assumption agreement with these compan1es.

~------~--~----~------~~~--~------61 Motor Sport

Victory for Volkswagen The outstanding results in 1987 were way for beginners so they can particip­ Sensational record time selected rallies in Audi 200 cars based in the lvory Coast Rally the wins in the German and British ate in a low-cost competition with the for Audi in the Pikes-Peak on production models, and the over Championships. same Ievei of technical performance. Hili Climb 4,000 km Safari Rally finished with a The emphasis of all Volkswagen's motor Last year again about 40 drivers took double victory for the Audi 200 quattro. sport activities was again on rallying in State-of-the-art catalytic converter tech­ Part in the ten races organised in Ger­ ln 1987 Walter Röhrl in an Audi Sport 1987. The greatest success was nology ensures environmentally safe many and abroad. Seven different win­ quattro created a sporting sensation Moreover, private drivers in Audi vehi­ achieved by the Volkswagen works driving in motor sport too - a fact ners from ten races served to clearly when he not only won the traditional cles also won numerous victories at na­ team of Kenneth Eriksson with co-driver which Volkswagen put into practice in the demonstrate the very high generallevel "Pikes-Peak Hili Climb" in the USA but tional and international rallying events, Peter Diekmann in the lvory Coast Rally: popular competition for up-and-coming ~f driving talent in this exciting competi­ also knocked a considerable amount oft particularly in the USA and in the Scan­ lt was the first time that a Golf GTI 16 V drivers. the International Wintershall VW tlon. the old record time. dinavian countries. won a Rally-Drivers' World Champion­ Polo Cup. Volkswagen has always feit ship race. Driving in the secend Golf GTI an obligation to also promote junior driv­ During the past season Audi's works 16 V Erwin Weberand Matthias Feltz ers in sporting activities and to pave the teams successfully participated in four took third place and thus rounded oft the Volkswagen triumph.

This result was achieved in a discipline which is regarded as the toughest test­ bed for new automotive technologies. Once again it serves to impressively highlight the durability and performance of our production models, whose engi­ neering provides the basis for those en­ tered in motor sports.

ln the International German Rally Cham­ pionship "Volkswagen Motorsport" ran up three overall victories with the team of Klaus-Joachim Kleint and Manfred Hiemer in a Golf GTI 16 V.

For six years "Volkswagen Motorsport" has also been competing in Formula 3. During this period most of the victories and national titles worldwide have been won with vehicles using Volkswagen en­ gines. A new fact was recorded in Great Britain where since 1981 there have been 75 victories in Formula 3 Championship races, 63 of which were in succession.

63

was the first to sail round the of German-Spanish ties. History- a long way in the direc­ world and Pedro de Mendoza founded Buenos Aires. The A strength-sapping fluctuation tion of Europe group of islands called the Phi­ between monarchy, republic, lippines was also discovered civil war and dictatorship de­ Everyone in the enlarged Euro­ billion. ln the opposite direction and incorporated into the termined the recent history of pean Community benefits goods with a value of DM 7.4 Spanish empire. the country. The historical from the opening up of the billion were despatched for backgrounds of Basques and Spanish market as a result of West Germany last year. ln the At its peak of power the Span­ Catalans. Aragonians and Cas­ Spain's becoming a member of case of the Spanish goods the ish world empire covered the tilians are too different, and the the EEC in 1986. ratio between agricultural pro­ entire lberian peninsula, the mentalities along the Atlantic ducts and industrial goods has Netherlands and parts of ltaly. and the Mediterranean and the There is a fresh wind blowing in seen a considerable shift to­ lt stretched across North Afri­ borders with Portugal and the Spanish economy and it is wards more expensive mer­ ca, Angola and Mozambique, France are too varied. blowing more and more Euro­ chandise, i.e. less fruit and South and Centrat America to pean products onto the shefves more machinery. California and Florida. Spain An inappropriate land reform of Spanish shops. Spanish con­ ruled over the Philippines and and intemal quarrelling im­ sumers are taking advantage However, trade across the Pyre­ the one-time Portuguese pos­ paired social and economic and thereby animate trade with­ nees has not always flourished sessions of Goa, Macao, Timor development for a long time. in the Community. ln this way as weil as nowadays. Up to the and the Moluccas. Whilst the disastraus conse­ the newly arisen brisk demand economic linking of Spain to Eu­ quences of the Second World also creates jobs in the neigh­ rope the country has experi­ A successful maritat policy al­ War with the destruction of bouring countries and attracts enced periods of great prosper­ so made a major contribution large parts of German industry fresh capital from the European ity, but also hard times. to this unique position of pow­ simultaneously laid the foun­ neighbours to Spain - in 1987 er. Ferdinand of Aragon and his dation stone for its rebirth, alone there was a flow of DM 4 wife lsabella of Castile married Spain completely isolated it- billion. At the same time Spanish ex­ ports in the EEC countries are ensuring that the range of pro­ ducts on offer becomes even broader and more attractive. The import and export figures impressively illustrate how Ger­ man-Spanish trade relations are in full blossom: ln 1960 West Germany exported goods to Spain for about DM 397 million, and now the figure is DM 12.1 The Plaza de Espaila in the heart of Barcelona Port of Barcelona ln the port of Barcelona a car­ avel recalls the one-time mag­ nitude of the Spanish empire. Compared with modern-day Standards, its dimensions are modest. lt is hard to imagine crossing the Atlantic on board a nut-shelllike this. But the ves­ sel upon which this model is based, the Santa Maria, actu­ their daughters into English, self from the rest of Europe. ally sailed far into the Carib­ Portuguese and German dy­ bean. And from its crow's nest, nasties. As a result the Spanish "econ­ the small lookout high up on omic miracle" began at a later the main mast, a Spanish sailor lt was in this period that the stage in the 1960's and it was discovered the western hemis­ connections with the Haps­ only during the process of phere nearly 500 years ago. burg monarchy resulted: Joan democratisation, which had of Aragon and Castile married seen its climax so far in Spain's The captain of the vessel, Philip the Fair, Archduke of becoming a member of the Eu­ Christopher Columbus. was Austria. ropean Community in 1986, searching for the sea route to The Santa Maria replica in the port of Barcelona that the country finally opened lndia on behalf of the Spanish World and the almost simul­ Enormous treasures from con­ Their son became King Charles itself up to its neighbours crown in 1492. taneaus shaking oft of the quests in America filled the I of Spain in 1516 and was elect­ economically and culturally: eight-hundred year foreign country with wealth. On other ed Kaiser of the Holy Roman Spain became a firm part of He landed on the Bahamas on dominance by the Moors a expeditions the Aztec empire Empire by the German Elec­ Europe. October 12 believing that he momentaus chapter in world of Mexico was conquered by tors in Frankfurt am Main in had reached the Indian coast history had begun - so too Heman Cortes and the empire 1519. As Charles V he took over and occupied the territory for Spain's rise to become the lar­ of. the lncas by Pizarro, whilst responsibility for an empire in the Spanish crown. With this gest empire which hasever ex­ the Portuguese Magellan on which the sun was never toset. chance discovery of the New isted on earth. behalf of the Spanish crown This was the historical climax

71 70 of liberty and creativity, parti­ guest. This is more than just The climax, excitedly awaited detrimental effect. ready signed a cooperation tion of SEAT in Spain also Impetus for the cularly for young people and proof of the world's confidence by young men in particular, is United we and licence agreement limit­ made a commitment here at­ continent women. in the economic potency and the encierro. When a sign is stand After the withdrawal of Fiat ed to seven years in 1982 in tractive. A SEAT export sales political stability of the country, given and the paddock or cor­ the company finally no Ionger order to secure extra produc­ organisation was set up effi­ "La movida" has turned Madrid For the tourist the day is al­ it is also a compliment to the ralillo is opened, bulls charge had the strength to hold its tion capacity. ln 1983 produc­ ciently and quickly with ad­ upside down. No one can ex­ ready strenuous enough. Apart energy and culture of its peo­ out, bursting with energy and own on the market in the long tion of the Passat was com­ vice from and utilisation of plain what it is and no one can from the fascinating archeo­ ple. vehemence, through the nar­ Various automobile groups term. By resolving to separ­ menced in Barcelona and a Volkswagen distribution faci­ show it to you. But Ia movida logical museum he or she can­ row alleys of the old part of the from Europe and the USA ate SEAT from the state­ little later of the Polo in Pam­ lities. can be feit everywhere. not avoid visiting one of the lar­ town. An uncountable stream have been taking full advan­ owned group of companies plona. When nearlytwoyears gest galleries in the wortd: the Fiesta of people follows them, driving tage of the large supply of INI the Spanish government later 95,000 Volkswagens With the existing facilities at With ·momentum· a cultural famous Prado. Bosch, Rubens, them loudly in the direction of qualified workers and the in­ took an important step, in rolled off Spanish assembly SEAT the problern of short­ avalanche was triggered off in van Dyck, Titian, Velazquez, The Fiesta de San Fermin in the plaza de toros. vestment incentives offered conjunction with great finan­ lines Volkswagen had term increase in capacitywas the old and venerable capital of Goya, Botticelli, Raffael, Gior­ Pamplona is celebrated on July by the government to manu­ cial sacrifices. The way to­ achieved a market share of solved at a stroke: Growing Philip II, the hard beauty with gione. EI Greco. Tintoretto, 7 every year. lt is one of more The test of nerves in the arena facture in Spain. Owing to wards new cooperation was 8.5 % in Spain. A few years demand for the Golf had tobe the monumental buildings and Brueghel, Dürer, Cranach and than 3,000 fiestas which take is an inseparable part of Spain, economic growth and rising opened. The requirements previously the sharewas only met urgently. Together with seemingly chaotic road traffic. Rembrandt are just a few place every year in Spain, gen­ and no event, apart from the wages the roads became that SEAT be only associated a bare 0.5 %. the Polo and Passat manufac­ Not only has Plaza Mayor, one names which make this art erally in honour of the local pa­ realm of footbaU with its stars more and more populated with a really competitive part­ tured by SEAT, Volkswagen of the most marvellous gallery something not to miss. tron saint. ln Pamplona, the Real Madrid and FC Barcelona, with cars - unfortunately ner and that the SEAT The opportunity of taking achieved its corporate aim of squares in Europe, which has capital of the historic Navarra excites the temperament of there were lass and lass marque, i.e. the Spanish over the whole of SEAT being "No. 1 in Europe". And seen fiestas, bull-fights, burn­ An annexe of the Prado has be­ at the foot of the Pyrenees with Spaniards more than the cor­ SEATs among them. company, be retained, fitted seemed to be promising in last but not least, Spain itself ing at the stake, art and thea­ come something of a place of 100,000 inhabitants, it lasts a rida. has the added attraction of tre, since the 17th century, pilgrimage for friends of art all full seven days and brings tour­ being the fifth largest auto­ become a unique vast stage. over the world. Since 1982 one ists from all over the world un­ mobile market in Europe. Madrid is bubbling over in a of the most impressive pain­ der its spell. renaissance of literature, tings in the world can be King Juan Carlos I hirnself music, painting and theatre. viewed here, the history of gave a clear indication of the which also elucidates a tragic future of SEAT. The monarch, Where cultural enthusiasts chapter of Spanish history: the who has not only studied poli­ were so far magically attracted Guernica anti-war painting by tical science but also philoso­ to Paris and London, Madrid Pablo Picasso. phy, the history of Iiterature has now advanced to become and economics, was weil the personal tip as far as cul­ And with Picasso we have aware of the economic im­ ture is concemed. A firework mentioned one of the names portance of SEAT, and of the display of theatre perform­ which have had a major influ­ opportunity available. Volks­ ances, fashion shows, vernis­ ence on the art scene of the wagen offered technological sage days and concerts bom­ world only in recent times, as and administrative know­ bards the visitor every day. But with Joan Mir6 and Salvador how and, with its commit­ ment, promised to become the largest foreign investor in with the SEAT 1400 and a little Spain. His personal interest in A long way to later, in 1957, with the "600". lt German-Spanish collabora­ was particularty this subcom­ tion was underlined by the the economic pact car, which was built under visit to Wolfsburg of the King miracle Fiat's auspices, which visibly in­ in 1986 in the course of a dicated the beginning of the au­ Fora classical agricultural coun­ tomotive upward trend of a try it has not been easy to country which had to struggle change its face overnight. The with considerable economic dif­ negative balance of trade was, ficulties for decades. if at all, only compensated for by the foreign exchange of holiday This Spanish people's car, of makers and bank transfers from which there are still estimated people employed abroad. Spain to be 100,000 models on the imported far more than it ex­ road, was the first concrete only at night, when the "ga­ Dali. No matter whether you ported. evidence of the reward for hard tos·. the ·cats• as only the true are talklrlg-about the director work. Social rise, painstakingly night-revellers of Madridare al­ Luis Bunuel or the filming of Forthis reason the government saved up for or bought on credit. lowed to call themselves, are Carmen only recently by Cartos in Madrid had been pursuing a ran throughout the country full out and about. does the city's Saura or Paco de Lucia's guitar course of systematic industriali­ of pride. subculture awake. music, Spanish influence in­ sation long before Spain be­ spires Europe at alllevels, just came a member of the Com­ ln 1972 SEAT presented the fa­ Madrilenians have always liked as Europe inspires Spain. mon Market and had been en­ mous "127" which has come to With dwindling market perfectly into the strategy of many respects - not least state visit to West Germany. going out, enjoyed football or a deavouring to make the country be the best-selling car in Spain Shares there was an ever the Volkswagen Group of op­ from a European point of He was accompanied by bull-fight and spent the night ln a few years' time the country attractive to foreign investors by with a total of 1.4 million vehi­ greater Iack of resources for erating in divisions: SEAT view. For the Volkswagen Queen Sofia, a great grand­ having heated discussions in will present itself to the world offering specific incentives. cles. Over the years SEAT, with indispensable investments in ranks alongside Audi and Group SEAT offered not only daughter of the last German the characteristic cafes and for the Olympics: When the sales of DM 2.4 billion, has en­ Production facilities, research Volkswagen and thus closes the opportunity of having a Kaiser. stand-up bars. But Ia movida is Olympic flame flares up in the The first fruits of these efforts tered the league of the 200 ma­ and development. The Iack of a majorgap. third independent marque in far more than that: lt is the start Barcelonastadium in 1992, the were borne by the germinating jor companies in the world. the company's own export the market. The dynamic of a new identity, a new feeling whole world will be Spain's automobile industry-first of all sales Organisation also had a Volkswagen and SEAT had al- sales and service organisa-

72 73 A piece of unity - with no politics involved Competitiveness in the world wagen and SEAT to grow close automobile market calls for un­ together but which will also compromising quality through­ bring both countries even near­ out the entire Volkswagen er to one another. Group. "Made-in-Germany" quality can be achieved not Even in the past Spanish em­ only in Germany with Spanish ployees wondered why there and other European employ­ have not been many more Ger­ ees but just as weil in their mans "taking over" the plants home countries. in Barcelona and Pamplona. Why indeed? The Spanish ma­ Some hard work is being done nagement identified itself with in Barcelona and Pamplona, the objectives of corporate and the company's linking up head office in Wolfsburg right to the international Volks­ from the very beginning. Spe­ wagen quality standard is as­ cialists from the parent com­ sured. But being competitive pany are only called in when, nowadays also calls for a from time to time know-how systematic division of produc­ transfer from Wolfsburg is in­ tion. Forthis reason, planning · dispensable. will provide for a refined inter­ linked production system be­ Whilst more and moreGerman tween the various locations in dictionaries can be seen on Europe. Spanish desks, German col­ leagues are learning to speak Before the target is reached, proper Castilian. 8oth sides there have tobe massive capi­ now know much more than tal investments in Spain in the "please" and "thank you" in the years to come- investments language of the equal-ranking which will not only allow Volks- Counterpart.

Friendly collaboration is now very weil established and ev­ eryone is aware of the fact that such cooperation is to every­ one's benefit and that in the Volkswagen Groupthere are no one-way streets or second­ class citizens. From this aspect, the commitment pur­ posely involving mutual de­ pendence is a step towa rds the European Community of 1992. At SEAT the European idea is already being put into practice; Spaniards and Germans full of pride regard themselves as Europeans.

75 The SEAT Marbella quickly SEAT - fastest growing Cars for Europe conquered the hearts of the buying public. This smart sub­ Low-priced but completely Europeon marque compact car at the lower end equipped subcompact and of the price-scale is an ideal Just one year after the take­ Volkswagen has at its disposal middle-range cars are a market Ieader model for young over by Volkswagen the first as a result of more than 50 mil­ which still promises healthy people or an attractive second success stories are coming in: lion vehicles sold in five de­ rates of growth in Europe. On car. The Ibiza and Marbella models cades on all continents. the one hand, because they are selling fast on the overall are uncomplicated and mano­ With the compact and sporty European market. And what is The employees in Barcelona euvrable, on the other because SEAT Ibizadriversare being ad­ and Pamplona are motivated. more. SEAT is growing faster in many countries they balance dressed who wish to classify than any other automobile On the one hand, by the high the increasing automobile de­ themselves between the Polo manufacturer in Europe, staff standard of quality achieved so mand with purchasing power. and Golf. ln the GLX version reduction seen in recent years quickly, and on the other by the This segment of the market is with regulated 3-way catalytic perceptible ·momentum· in­ is even being replaced by the now covered by the Volks­ converter it meets the require­ taking on of new staff. With side the plants: Whereas 6 ve­ wagen Group with an attrac­ ments for a clean, environ­ about 25,000 employees there hicles per employee per year tive range of models. SEAT has ment-friendly car. are now a few thousand em­ were being built at the beginn­ gained a profile of its own, and ployees more working at SEAT ing of the 1980's, productivity been given a separate Strate­ Buyers who are looking for than when the company was has increased so far to 18 per gie function. more comfort, spaciousness taken over. employee per year. Things are and possibly more power are moving. attracted by the SEAT Malaga. With 25 % growth in 1987 the With a dynamic 100 bhp injec­ trend in Spain is surpassing Over 500 Polos come oft the tion engine it is already moving even the boldest of expect­ lines at the SEAT plant in Pam­ in the direction of sportiness. ations. The Spanish market is plona every day. The visi­ becoming the second most im- tor Iooks in vain for a difference ln future SEAT vehicles will be­ come more and more common on the roads of Europe. The great age of Spanish cars is just beginning.

portant European foreign mar­ from the Wolfsburg production. ket for Volkswagen. ln 1987 What Volkswagen technicians SEAT already achieved a 2 % simply describe as "identical share of the European market, nuts and bolts production· which had originally only been characterises the high stand­ expected for 1990. ard of manufacture in Pamplo­ na andin Barcelona: Not even Owing to the joint work with an insider would see any differ­ Volkswagen SEAT is taking the ence between a Polo from best approach towards linking Spain and an "original" from up to the forefront of European the Wolfsburg parent plant-it automobile manufacture. is indeed the same vehicle. From research and develop­ ment through planning and production to quality assur­ ance, the enormaus know­ how can be utilised which

76 77

Financial Statements 1987

Volkswagen Group

2

1

0 1984 1985 1986 1987 Dividend of Volkswagen AG

81 80 Consolidated Balance Sheet of the Volkswagen Group Consolidated Statement of Earnings December 31, 1987 of the Volkswagen Group - DM million - As at December 31, 1987

Assets Note Dec. 31,1987 Dec. 31,1986 Note 1987 1986 DM million DM million Fixed assets (1) Sales (9) 54,634.9 52,794.3 lntangible assets 29.1 1.5 Cost of sales 48,525.9 46,745.9 Tangible assets 13.405.6 12,111.3 Gross profit + 6,109.0 +6,048.4 Financial assets 1,125.6 1,099.5 Selling and distribution expenses 3,980.0 3,904.8 Leasing and rental assets 4,918.9 4,106.3 General administration expenses 1,518.2 1.474.7 19,479.2 17,318.6 Other operating income (10) 3,361 .8 2,562.3 Current assets Other operating expenses (11) 2,231 .5 1,930.3 lnventories (2) 6,617.9 6,801 .7 Results from participations (12) + 80.2 + 65.9 Receivables and other assets (3) 9,155.0 8,369.3 lnterest results (13) + 12.0 + 268.1 Securities 425.5 364.2 Write-down of financial assets and Cheques, cash on hand, deposits at German securities classified as current assets 222.8 39.3 Federal Bank and postal giro balances. cash in banks 8,135.0 8,552.8 Results from ordinary business activities + 1,610.5 + 1,595.6 24,333.4 24,088.0 Extraordinary expenses (14) 443.3 473.0 Prepaid and deferred charges 248.5 305.8 Taxes on income 569.2 542.4 44,061 .1 41,712.4 Net earnings 598.0 580.2

Stockholders' equity and liabilities Note Dec.31, 1987 Dec.31,1986

Stockholders' equity

Subscribed capital of Volkswagen AG (4) 1,500.0 1,500.0

Ordinary shares 1,200.0

Non-voting preference shares 300."0

Potential capital 200.0

Capital reseNe 2,803.2 2,803.2

Revenue reseNes (5) 5,692.4 5,087.7

Net earnings available for distribution 307.6 307.1

Minority interest in consolidated subsidiaries 422.4 411.1

10,725.6 10,109.1

Special items with an equity portion (6) 2,202.8 1,828.4

Special item for investment subsidies 9.4 9.5

Undetermined liabilities (7) 14,864.1 14,513.7

Liabilities (8) 15,817.8 14,936.8

Deferred income 441.4 314.9

44,061.1 41,712.4

82 83 Notes on the Financial Statements of the Volkswagen Group for the Fiscal Year ended Dec. 31, 1987

The financial Statements of the Volks­ Conversion to the new Accounting (2) lnventories wagen Group have for the firsttime and Reporting Law Dec. 31, 1986 been prepared in accordance with the Dec. 31. 1987 DM million regulations of the Accounting and Re­ DM million porting Law which came into force on Raw materials and supplies 1,834.9 January 1, 1986. in doing so we have 1,611.2 made use of the possibility of an early Work in progress 1,770.3 1,772.2 application of the new law. Finished goods and merchandise 3,228.8 3,177.0 The previous year's figures of the bal­ Advance payments 7.6 17.6 ance sheet and the statement of earn­ 6,617.9 6,801.7 ings have been adapted to the new re­ gulations on presentation. The actual values have been adopted unchanged.

(3) Receivables and other current assets Dec. 31, 1987 Dec. 31, 1986 DM million DM million

Trade receivables 1,948.8 1,860.7 Notes on the Balance Sheet Receivables from affiliated companies 6.7 6.0 of which trade receivables 3.0) 0. 1) Receivables from companies in which participations are held 299.3 349.1 of which trade receivables 203.4) 63.4) The book value of the Group fixed as­ ( 1 ) Fixed assets Additions to tangible and intangible as­ sets on balance-sheet date was DM sets and additions to Ieasing and rental Other current assets 6,900.2 6, 153.5 19.479.2 million. This figure comprises assets amounted to intangible, tangible, financial and Ieasing 9,155.0 8,369.3 and rental assets.

DM million Significant items under "Other current the activities of the finance and Ieasing assets" are the receivables relating to 1 companies. lntangible assets 57.7 ) 2 Tangible assets 4,372.3 ) Leasing and rental assets 3,317.8

1 ) lncl. adjustment items arising from initial consolidation 2) Amounts brought torward of companies consolidated for the firsttime

Depreciation for the current year was as follows:

DM million lntangible assets 1.8 Tangible assets 3,066.8 Leasing and rental assets 1,489.8

As a result of the valuation of particip­ method, changes in value resulted es­ ations in associated companies under­ pecially within the financial assets. taken for the first time by the equity

84 85 The subscribed capital of DM 1,500 mil­ ed capital stock of DM 300 million and a (4) Subscribed capital (8) Liabilities lion is composed of 6 million bearer potential capital stock of DM 200 milli­ Type of liability Dec. 31 ,1 987 Dec. 31, 1986 shares with nominal value of 100 DM, on, both expiring on June 30, 1989; the DM million DM million 12 million bearer shares with nominal latter can be utilised by the holders of value of 50 DM and 6 million non-voting the 192,000 warrants attaching to the Loans 1,123.0 1,287.1 preference shares with nominal value of option bonds issued in 1986 up to a to­ of which convertible (-) (- ) 50 DM. ln addition there is an authoris- tal of DM 97.5 million. Liabilities due to banks 7,516.6 6,039.2 Advance payments received 323.4 195.2

(5) Revenue reserves Trade payables 3,562.2 3,221.5 Dec. 31, 1987 Dec. 31. 1986 Notes payable 195.1 1,050.8 DM million DM million Amounts payable to affiliated companies Legal reserve 60.0 60.0 0.1 1.1 Amounts payable to companies in which Reserve for treasury stock 16.7 16.7 participations are held 205.4 85.3 Other revenue reserves 5,615.7 5,011.0 Other liabilities 2,892.0 3,056.6 5,692.4 5,087.7 of which taxes ( 617.6) ( 591.1) of which in respect of social security ( 427.9) ( 321.8) 15,817.8 14,936.8

(6) Special items with an equity portion Dec. 31, 1987 Dec. 31,1986 Of the liabilities shown in the balance DM million DM million sheet a total of DM 609.6 million is secured through pledges or similar. Reserves for tax purposes 249.9 292.5 Depreciation for tax purposes 1,952.9 1,535.9

2,202.8 1,828.4 C~ntingencies and Commitments ln addition to the liabilities shown in the balance sheet there were the following contingent liabilities: Dec. 31,1987 Dec. 31,1986 DM million DM million (7) Undetermined liabilities Dec. 31,1987 Dec. 31,1986 Contingent liabilities with respect to notes 2,059.0 296.8 DM million DM million· Contingent liabilities with respect to guarantees 81 .3 132.4 Contingent liabilities with respect to warranties 47.7 30.0 Undetermined liabilities for pensions and similar obligations 5,889.1 5,293.7 Pledges on company assets to secure another party's liabilities 20.1 21.8 Undetermined liabilities in respect of taxes 924.7 992.2 Other contingent liabilities 0.9 0.9 Other undetermined liabilities 8,050.3 8,227.8 14,864.1 14,513.7

The other financial Obligations from amount annually to some DM 175.6 mil­ Other financial obligations long-term rental and Ieasing contracts lion. Undetermined liabilities for pensions Other undetermined liabilities comprise and similar Obligations are based on ac­ among other things undetermined liabi­ tuarial computation and the going-value lities for warranty obligations, Ieng-ser­ method for the German companies, tak­ vice awards, early retirement scheme ing an interest rate of 6% as basis, and and other workforce-related costs. on comparable principles for the foreign companies.

86 87 Notes on the Statement of Earnings

(9) Sales in 1987 (11) Other Operating expenses Total Share Dec. 31,1987 DM million % DM million

West Germany 22,554.6 41 .3 Other operating expenses 2,231 .5 Europe (excl. West Germany) 18,658.4 34.2 of which transfers to the items with an equity portion ( 815.6) North America 6,855.4 12.6 Latin America 3,792.9 6.9 ln the Volkswagen Group other operat­ expenses from handling of foreign ex­ Africa 1,108.3 2.0 ing expenses comprise among other change transactions and expenses for Asia/Oceania 1,665.3 3.0 things write-downs of receivables, various risks. Total 54,634.9 100.0

(12) Results from Vehicle sales of the Volkswagen Group for the first time the income from leas· participations Dec. 31,1987 Dec. 31,1986 in 1987 accounted for 78% of sales pro­ ing and rental as weil as the proceeds DM million DM million ceeds, and part sales for 9%. 13% relat­ from the sale of used assets of Ieasing ed to other sales. Other sales included and rental companies. lncome from participations 80.2 67.0 of which from affiliated companies ( 2.6) ( 2.8) of which from associated companies (73.7) (61.8) (10) Other operating income Dec. 31,1987 Expenses from loss assumptions 1.1 DM million 80.2 65.9

Other operating income 3,361 .8 of which income from elimination of special items with an equity portion ( 439.9) (13) lnterest results Dec. 31, 1987 Dec. 31, 1986 Other Operating income resulted addi· ings of consolidated foreign companies. DM million DM million tionally in the Volkswagen Group primar­ disposal of fixed assets and write-ups ily from the elimination of undetermined of tangible assets, rebilling of costs, lncome from other securities and liabilities, differences from the transla­ handling of foreign exchange transac­ long-term loans 14.5 51.3 tion of items in the Statements of earn- tions and Ieasing and rental business. of which from affiliated companies ( 3.6) (11.8) Other interest and similar income 1,443.7 1,347.5 of which from affiliated companies ( 0 5) (49.2) lnterest and similar expenses 1.446 2 1,130.7 of which to affiliated companies (11.1) (-) 12.0 268.1

Extraordinary expenses included the associated with the restructuring of pro­ (14) Extraordinary expenses costs connected with the closure of the duction capaeitles at the AUTOLATINA Westmoreland plant and the expenses companies.

88 89 Total expenses for the period Dec. 31,1987 DM million Cost of materials Raw materials and supplies, purchased goods 29,420.1 Purchased services 1,911.2 31,331.3

Dec. 31,1987 DM million Labour cost Wages and salaries 12,609.4 Social security and pension costs 2,582.7 of which in respect of pensions ( 987.5) 15,192.1

Structure of the workforce Wage-earners 131,114 Salaried workers 73,943 Salaried staff 55,401 260,458 Apprentices and trainees 6,667 267,125

Particulars relating to the The members of the Supervisory Board Retired members of the Board of Ma­ Supervisory Board and the Board and the Board of Management are listed nagement or their surviving dependants of Management of Volkswagen AG on pages 6 and 7. received DM 6,564,004 in respect of Volkswagen AG and the Group The remuneration of the members of the Board of Management for the fiscal The remuneration of the Supervisory year 1987 totalled DM 11,697,172 in Board amounted to DM 318,500 in re­ respect of Volkswagen AG and spect of Volkswagen AG and the Group. DM 12,203,440 in respect of the Group.

--

90 91 The Volkswagen Group in Figures 1978-1987

------1~9~78~------1~9_79------~------1~9~80~------~1~9~81~------~1~9~82~------~1 ~98=-=3~------~1~9M~------~1 00~5~------~19~8~6~------~19~8~7

Sales (DM million) 26.724 30,707 ----,....______;:3~3.:.::.2~88~------=3~7!..:::,8..:..:78:.______:::3_:_:7 ·c..:.4=-34~ --__:.4.:.!0'.::;.08=-=9~------=-45:.!.'.:.;67:.....:1 ______~52::!..5:::.:0::.::2:.______:::52::.:..· 7:..::9:.....:4 ______.: 5:._4:.:.:,6::3:.:.5_1

Change on previous year in% 11 15 8 14 - 1 7 14 15 3

Domestic 11,229 11,850 12,064 12,027 14.453 14,638 16,171 18,839 22,555 Abroad 15,495 21.438 25,814 25.407 25,636 31,033 36,331 33,955 32,080

Export of ~do~m~e:::,:s::ti~c~G~ro=u~p~c=o~m~pa=-:n..:..:ie=-:s:.______~10:.!. ,.::;.93=-=2~----:.__1~2.:.::,3_3_7 ______-'------:.__14~,~10=-=2~----:.__1~4!..:::,9:.:.57~------1~5~,7:..::3~3 ______~15:.!.'..:..:46=-=0~------=2~0~,1=08=------~2~4:.:.:,0~2~5~----~ 23~,=41~4~----~2~2!..:::,8:.:.98~I

~N~et~c=o~n~tri:.:.b~ut~io~n~o~f ______~~------~~~------'- ~fo~re~i~gn~G~ro:.:.u~p~co~m~pa~n~ie:.:.s ______.:.;5·:.:.9..:..:70:.______..:..:7~,3~9~8--~'------~8~.~73~3~----~,~2~.3-98 ______1_1~.3~4~6------~,,~,781~2~----~,~2~.8~64~------,-4-.6-9_8 ______14-.-12-7------1~3~.0~80~

'------~~~------~~~------~~------~~------~~~------~~------~~------~~~ ~V~eh::i:.:.c::le:.....:S=-:a::le::s~(:.:.th~o=u~~n=d~u=ni~ts~) ______2.:.!'.::;.39=-=3~------~2.:.::•5_3_9 ______'-______:.__2.:.!,4~9=-=5:.______=2~.2..:..:79.:.;______~2~.1:..::2~0------:.__2:.!.,~12=-:7 ______=2~.1..:..:45=------~2~,3~9:.:.8~------2~,..:..:758~------~ 2~.7..:..:74~:

~C::ha~n~g~e=o~nLp~re~v:.:.io.:.;us=-y~e=a..:..:r..:..:in:.....:%.::;.o______:.__7 ______6 ~------~2:.______-~9~------_:_:7 ______~0:.______~------~1~2 ______1:..::5~------~ ·

~D~om~e~s~ti~c______~8~95~ -----~9~01~------~------~~7~8~8~------~7:..::3~8______~6=-=7 =2_ ___~~7=5~ 0------~~7=0~8______~7=2~2 ______~8~38:.______~ 9~21~ ~Ab~r~oa~d~------..:..:1~,4=98:.______..:..:1·:.:.6.::;.38~------'------1~._70~7 ______1~,5=-4~1 ______1~, 4..:..:4:.:.8______:.__1~,3=-=7..:..:7 ______:.__ 1~.4:.:.3..:..:7______~1~,6~7~6------_..:..:1~.9~20:.______..:..: 1 !..:::,8~53=...... ~Pr:..::o::d:.:.u~ct::io=-:n..:..:(~th~o=u:.:.sa=n~d:.....:u::n..:..:its.:.!)______2.:.!'.::;.38=5~------=2.:.::.5_4_2_~,'------=2~,5~7~4------~2::!.,~24~6~------=2,~1:.:.30.:.;______~2~,1:.....:1~6 ______~2::!. • ..:..:14~8=------~2~,3~98~------~2~,7:.....:7_:_:7 ______:.__ 2~. _:_:77~1~

~C::ha~n~g~e=o=nLp~re~v:.:.io.:.;us:_y~e=a..:..:r..:..:in:.....:%.::;.o ______:.__7 ______7 ______-,'------' ----:.__------1:..::3~------5=------..:..:1______~2:.______:_:12~------:.....:1=6------:.....:0~1

~D~om~e:::,:s::ti.:.;c ______..:..:1~,5=69=------..:..: 1·~5~58~~'------~1~.4~99~------..:..:1,~4~10~------~1 ,~38~1~------~1,~41~3~------1~.~47~4~------1~,6~3~5~-~--1~.6~5~4~----~1~.6~6~6~ ~A=br.:.;oa::d:.______:::8..:..: 16:.______:_9~84 ______-...... ______~1,~07~5 :.______.:.;83~6~----~74~9~-----7~0::3~-----_.:6~7~4------~7~~~-----~1~,1~2~3-----_:.....: 1 ~,1=0~5 1

~W:..::o~r ~kf:.:.o..:..:rc~e~a~tLy~ea~r~e~nd~(t~ho=u=~=n~d~e=-=m~p=-=lo~y~e=es.:.!)_1 ______~20~7~ ------~2~4~0------"------2_58~------~24~7______~2~39=------~2~3~2 ______~238~------~2~59~------~2~7=6------~260==--:

~C~ha=-=n~g~e~o=n~p~re~v=io~us~ye~a~r~in~%~o ______~8=------1_6 ______-;'------~8 ______-__ ~4:.______-_:.....:3~------~3 ______~3~------~9~------_..:..:7 ______~ 6~,

~D~om~e~s~ti.::;.c______~ 1~39~------1 ~57~------~------1 ~59~------_..:..:1 =60~------~15~8~------~15~6~------~16~0~--~---1~7~0~------1~6~9------1~7~0 ~A~br~o.::;.ad~------~6=-8------83______'------9~9------:.__8:7:______:.....:8~ 1 ------~7~6~------~7=8------~8~9------~1=0..:..:7______~ 90~

21 ~C=a~pi~ta=l~ln~v~e~s~tm~en~t=s ~(D=M~m~i~lli.::;.on~)______..:..:1.~9.:.;90:.______~3~,1~00--~'------~4.:.::.2~79~------4:.:.:,8~5~1 ______4~,~89~2~------~4~,8~58~------:.....:2~,7~8~2:.______~3,~~~------=6~,3~7~1------4~,5=9~2~

~C~h~an~g~e~o~n~p~re~v~io~u~s~ye~a~r_in_0_~------~17:.______5__ 6 ______'------~38~------~1=3~------~------~-~~1 ______~x:.______~22~------=8~8 ______:.....: 2~8~1

Domestic 1,559 2,374------'"' 3,163 3,089 3,654 3.476 1,889 2,508 3,849 4,324 ~A=br~o=ad7=------~4~3=-1------~~7~26~~'------~1.~1~16~------~1.~7=62~------~1.723~8~------~1.~38~2~------~8~9~3~----:.__~8~8~0~----~2~.5~2~2------~2~~~ ·

~A=d=d~it~io~n~s ~to=-=L=ea=s~in~g~a~n~d~R~e=-=n~t~ai~A~s~s~e~ts~(~D~M~m~ill=io~n)~------::------2~.02~1------~3~.2~17~----7 --~2~.7~38~------3~.~31~8~

Change on previous year in % 59 - 15 21

3 ~C ~as~h~F..:..:Io~w~(D~M~m~il~lio~n~)_1 ______2 2~,6=09:.______~2~.9-93_~'------~3,~ 1 -41______~3,~93=6~------.:.!3,~45~2:.______5:.!..~20~7------4~,0=8~1 ______4~,5 =-=5=8------4~,2~8~5------4:.:.:·8=-:7~4~

Change on previous year in % 5 5 25 - 12 51 X 12 - 6 14 Worldorce at year end; as of 1986 average 321 136 -300 -215 228 596 580 598 over year Net Earnings/Loss (DM million) 574

Up to 1983 mcluding additions to Ieasing Dividend of Volkswagen AG 192 120 120 240 306 306 and rental assets (DM million) 189 192 120 120 240 240 240 Up to 1003 mclud1ng deprec1ation on and Ordinary shares (DM million) 189 dJSposal of leasmg and rental assets Preference shares (DM million) 66 66 93 The Volkswagen Group 1n• Figures 1978-1987 Q)

lnventories and advance payments to suppliers 3.491 4.400 6,073 5,996 5,662 5,878 6,654 6,348 6,802 6,618 - 2.7 lnventories Receivables and the like 2,996 4,000 4.437 4,771 5,065 6.269 7,388 . 7,157 8,675 9,403 8.4 Receivables and other assets Liquid funds, trade acceptances 4,364 4,781 3,971 2,822 1,953 1,815 5,253 4,326 364 426 16.8 Securities Securities. treasury stock 1,016 1,123 1,151 1,129 1,290 2,528 1,588 3,960 8.553 8,135 4.9 Liquid funds Current Assets 11.867 14,304 15,632 14,718 13,970 16.490 20,883 21,791 24.394 24.582 0.8 Current Assets

Tot al Assets 18,180 21,678 24,797 25,337 25,893 28,755 32,942 34,822 41,712 44,061 5.6 Total Assets

Stockholders' Equity and Liabilities Stockholders' Equity and Liabilities Capital stock 1,200 1,200 1,200 1.200 1,200 1,200 1,200 1,200 1,500 1,500 Subscribed capital Reserves of the Group 4,224 4.625 4,757 4,990 4,911 5,227 5,165 5,929 7.891 8.496 7.7 Reserves of the Group Minority interest in consolidated subsidiaries 192 373 205 198 223 281 320 266 408 405 0.9 Minority interest in consolidated subsidiaries Stockholders' Equity 5,616 6,198 6,162 6,388 6,334 6,708 6,685 7,395 307 308 0.2 Net earnings available for distribution 3 17 X Minority interest in Undetermined liabilities net earnings to be distributed in respect of old-age pensions 2,341 2,749 3,107 3.475 3,626 4.235 4,739 5,029 1,828 2.203 20.5 Special items with an equity portion Other undetermined liabilitles 3,244 4,152 4,326 4,232 4,570 5,597 7.417 9,343 10 9 1.7 Special item for investment subsidies Undet ermined Liabilities 5,585 6,901 7.433 7,707 8,196 9,832 12,156 14,372 11.947 12,938 8.3 Stockholders' Equity

liabilities payable within more than 4 years 1,284 1,273 1,161 1.053 847 1,283 992 947 5,294 5,889 11 .2 Undetermined liabilities (pensions) 1 to 4 years 708 457 466 712 990 1,004 1.411 1,291 992 925 6.8 Undetermined liabilities (taxes) up to 1 year 4,776 6,592 9,378 9,351 9,485 9,925 11,570 10,569 8,228 8,050 2.2 Other undetermined liabilities liabilities 6,768 8,322 11,005 11,116 11,322 12,212 13,973 12,807 14,514 14,864 2.4 Undetermined Liabilities

Net earnings available for distribution Liabilities payable within (Volkswagen AG) 189 240 193 124 38 124 244 1,344 1,217 - 9.4 more than 5 years 1,456 1,999 37.3 1 to 5 years Minonty interest in earnin s 12.451 13,043 4.8 up to 1 year to be distnbuted 22 17 4 2 3 3 4 4 15,251 16,259 6.6 Liabilities

Outside Capital 12 .564 15 480 18 635 18 949 19 559 22 047 26. 257 27 427 29 765 31 .123 46 Outside Ca:...:p:..:.it.:;,:a:..:..l ______~ Total Capital 18,180 21,678 24.797 25,337 25,893 ~ ::-- 28,755 32,942 34,822 41,712 44,061 5.6 Total Capit al ~·~

Statement of Earnings ~:_ St at emen t of Earnings JCondt::nsed) (DM million) (DM million) (Condensed) January - December ~-- January - December Gross performance 27,285 31,638 34,989 38.197 38,030:::: 40,680 46,772 52,709 52,794 54,635 3.5 Sales Cost of materials 14,099 15,835 18,238 19,752 19,573 ...___ 20,852 23,824 26,623 46.746 48,526 3.8 Cost of sal es Labour cost 7,656 9,113 10,782 11,779 12.069~ .....___ 12,371 13,227 13,913 5,380 - 5,498 2.2 Selling and administration expenses DepreciatiOn and write·down 1,456 1,696 2,102 2.934 3,038~ .....____ 3.689 - 2,961 3.411 Other operating income le,;;",;;,_ss ______Depreciation on Ieasing and rental assets ...... ____ 1,060 1,259 632 1,130 78.8 other opera ting expenses Taxes 1,692 2,081 1.400 848 543 ~ .....____ 580 1,368 2,124 295 - 131 X Financial re sults --- - ( - ...... ____ 1,595 1,610 0.9 Results fro m ordinary business activit1es ------on mcome. earnings and property 1,624 2,004 1,329 772 458~-- 494 1,266 1,993 473 - 443 6.3 Extraordina ry results Sundry expenses less sundry income 1.808 2,246 2,146 2,748 3, 107 ~ ...... ____ 3,403 4,104 4,783 542 569 4.9 Taxes on income Net earnings/Loss 574 667 321 136 -300 '-...... 215 228 596 580 598 3.1 Net earning s Presentati on in accordance w1th tho now 94 _..,. Accountin g and ReRorting Law 95 Commercial vehicles from the Volkswagen range

V. Aß ZUbehör Service ;-

96