Volkswagen AG

09/17/2019 | News release | Distributed by Public on 09/17/2019 01:55

More and more investors are placing great importance on sustainability when making investment decisions. ...

Mr. Klein, why is sustainability when making money so important to you?

Klein: It's not about me. The demands of private customers are growing, just like those of institutional investors. The professionals, in particular, increasingly regard a lack of sustainability as a risk factor, because deficits in environmental protection, social issues and governance increase the danger of severe damage to reputation. In addition, politicians are exerting pressure through increasingly strict regulatory requirements.

What exactly do you understand by sustainable business?

Klein: I have named the three most important factors: it's about responsibility for the environment, for social issues and about good governance. From my point of view, governance is the key, because a lack of supervision increases the risk of lapses in the social and environmental domain. Sustainable business also means that companies must achieve added value without over-exploiting natural resources.

How do you evaluate Volkswagen's performance?

Klein: My assessment is ambivalent. Transferring the vehicle portfolio to electric cars is certainly the right step. Unfortunately, this strategic step is happening very late - but better late than never. The crucial thing is that Volkswagen should not just switch to electric drives but should also pursue a sustainable overall concept. This concerns the production and use of electric cars, as well as the infrastructure. I see critical points in the area of governance - above all in the composition of the Supervisory Board and its remuneration system.

What do you say to this, Mr. Pfitzner?

Pfitzner: I agree that e-mobility must be sustainable over the vehicle's entire life cycle. Volkswagen is also doing a lot to achieve this. We are working on transparent supply chains. We are investing in the charging infrastructure. Our new electric car, the ID.3¹, will be delivered to the customer with a neutral carbon footprint. In addition, those who wish it can source clean electricity for battery charging from our subsidiary Elli, which means that the car will be carbon-neutral over its entire life cycle. I admit that for a long time Volkswagen was not among the pioneers of electric mobility. But the diesel issue was a wake-up call. Now we are vigorously advancing e-mobility and investing heavily in it. We want to see ourselves at the forefront.

And governance?

Pfitzner: The composition and remuneration of the Supervisory Board are decided by the voting shareholders at the Annual General Meeting. There is therefore little room for maneuver on the part of the company directors in these matters.

Apart from e-mobility, what is Volkswagen doing to become a more sustainable company?

Pfitzner: One of the most important lessons learned from the diesel issue is how important integrity and compliance are. We are doing our homework here - in association with a far-reaching cultural transformation in the company. We have started a very ambitious decarbonization program which aims to achieve carbon-neutrality by 2050. By 2025 already, we want to have improved the carbon footprint of our passenger cars by 30 percent over the entire life cycle as compared with 2015. This is about twice as much as the legislation requires. It is also very important to us that we shape the transformation in a socially acceptable way. That's why we offer our employees a lot of training opportunities that open up new career prospects. One example is Faculty 73, which enables people to qualify as an IT expert in two years. In addition, we have agreed to guarantee job security until 2029.

Where do deficits exist?

Pfitzner: I still see great potential in recruiting our 660,000 or so employees as ambassadors for sustainability. Everyone can contribute - both in their personal lives and at the workplace. We can improve a lot in this regard.

You agree that e-mobility is the right way. What stumbling blocks remain?

Klein: In Germany, politicians must set clear incentives that create customer trust. Basically, electric cars should now receive the same advantages over diesel that the government previously granted to diesel vehicles over gasoline ones. I am convinced that, with the right funding, we would see very different sales figures. At least in the large cities, the charging infrastructure is already so well developed that it can't serve as an argument against electric cars.

Pfitzner: In general, however, the infrastructure must become significantly better. That's why Volkswagen, together with other car manufacturers, is establishing a quick charging network on European highways. That's why the Group will invest around 250 million euros in developing the charging infrastructure in Europe by 2025. Financial incentives are also important. The reduced company-car taxation for e-cars, for example, is a good step - it will give us a boost. It is important that we achieve an overall concept rather than just tweaking here and there. This also includes the energy transition, with the quickest possible exit from using coal, because e-mobility only makes sense with clean electricity.

What should an e-car cost?

Klein: In the long term, it should be possible to offer a car the size of a Polo or Golf at a price of 20,000 euros. If this cannot be achieved, many people will choose other forms of mobility. It is partly a chicken and egg problem, because cost advantages only come with high volumes, which in turn cause prices to fall. It must therefore be clear to everybody that the e-car can only prevail as a mass product.

Pfitzner: Mr. Klein is right: e-mobility can't be successful in a niche market. That's why we are rigorously pursuing high volumes and economies of scale with our electric platform MEB. We have just experienced the world premiere of the ID.3 at the International Motor Show in Frankfurt - an electric car for the masses, the size of a Golf.

That sounds very harmonious - however, investors are making increasingly high demands on the sustainability of companies. When was the last time you wished that Mr. Klein and his colleagues would go to the moon?

Pfitzner: Actually, we get on very well together here on Earth. Of course, there are different perspectives. But ultimately, it is in the interest of the investors to receive an adequate return on their invested capital and to minimize risks. That is also our goal: we want to operate sustainably and to be a successful company in the long term. That's why critical questions contribute to the future viability of our company.

Klein: It is important to understand that sustainability is not a trend. It will become even more important for investors than it is today. This applies to Europe in particular - we sense this not only in our conversations in Germany, but also in Spain, the Netherlands and other countries. It is therefore no coincidence that, globally, European companies are rated better in terms of sustainability than competitors from North America or Asia. In the long term, that can become an advantage for Europeans.