VW struggles to meet WLTP standards because of skills shortage

August 1, 2018 15:43 CET

WOLFSBURG — Volkswagen warned that a shortage of engineers is hampering efforts to get its cars to meet new WLTP emissions rules.

VW has seen engine experts depart since admitting to systematic emissions cheating in Sept. 2015. That has left the carmaker short of engineers now needed to work on models complying with stricter emissions tests, CEO Herbert Diess said on Wednesday.

“Engine development expertise has been lost,” said Diess, explaining that getting engines certified for road use has become a lot harder under a new Worldwide Harmonized Light Duty Vehicles Test Procedure, known as WLTP, that takes effect in the European Union from September.

VW last week poached BMW engine development expert Markus Duesmann to help overcome the problem, but warned that delays in getting road certification will result in bottlenecks for certain model variants between August and October.

“That impacts capacity utilization at our plants, so there will be closure days at our sites during this period,” Diess said. Although VW is sticking to its delivery targets, meeting them will be hard.

“One thing is clear, though: this will be a titanic task for the second half of the year, particularly on the margin side,” said Diess, who was promoted to the top job in April after running the VW brand.

In a press conference on Wednesday to discuss second-quarter results, Diess said the changeover to the WLTP test procedure poses, “The biggest volume and earnings risk for Volkswagen.”

The introduction of WLTP rules was accelerated in the wake of Volkswagen’s diesel cheating. Regulators now take a much more granular look at vehicles and test car pollution levels much more comprehensively, Diess said. “They look at what kind of tires were fitted and whether the air conditioning is switched on,” Diess said.

In June, VW warned that production of up to 250,000 cars will be delayed because of WLTP and said last month it would be renting parking spaces to stockpile vehicles that cannot be sold.

Resolving bottlenecks caused by WLTP rules could cost Volkswagen more than 1 billion euros, Chief Financial Officer Frank Witter said on Wednesday.

Daimler and supplier Valeo cut their outlooks citing the introduction of new stringent emissions standards and a slowdown in growth as a trade war and tariffs hamper global trade.

Diesel scandal costs

Although its sales have held up, Volkswagen is still suffering the financial consequences of the diesel emissions cheating almost three years since it broke. The scandal has cost the carmaker 27.4 billion euros so far and second-quarter earnings took a 1.6 billion euros hit to cover a fine and legal expenses, it said.

A 5.5 percent rise in vehicle sales helped VW Group to lift second-quarter operating profit before special items to 5.58 billion euros from 4.55 billion a year-earlier. After special items, group operating profit dropped by 13 percent to 3.95 billion euros.

Despite confirming its outlook for a full-year adjusted operating margin of between 6.5 percent and 7.5 percent, Volkswagen warned that sticking to its financial targets will be a challenge. After special items, VW said it anticipates that its operating return on sales will fall “moderately short.”

In the wake of its emissions scandal, Volkswagen accelerated a push to expand its portfolio of electric cars. The Wolfsburg-based carmaker said it could start production of solid-state battery cells from 2024 or 2025.

“We must not make ourselves dependent on a few Asian manufacturers in the long term,” Diess said, explaining that advances in ceramic separators had raised the viability of mass production.

A solid state battery factory would likely be in Europe, or even in Germany under the right conditions, Diess said.

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