TheVolkswagenScandal

January2016

WrittenbyBrittBlackwelder,KatherineColeman,SaraColunga-Santoyo,JeffreyS.HarrisonandDanielleWozniakattheRobinsSchoolofBusiness,UniversityofRichmond.Copyright©JeffreyS.Harrison.Thiscasewaswrittenforthepurposeofclassroomdiscussion.Itisnottobeduplicatedorcitedinanyformwithoutthecopyrightholder’sexpresspermission.Forpermissiontoreproduceorcitethiscase,contactJeffreyHarrisonatRCNcases@richmond.edu.Inyourmessage,stateyourname,affiliationandtheintendeduseofthecase.Permissionforclassroomusewillbegrantedfreeofcharge.Othercasesareavailableat:http://robins.richmond.edu/centers/case-network.html

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“Asustainablesupplychainandenvironmentallycompatible

transportationsolutionsformanindispensiblepartofdemonstratingcomprehensiveresponsibilityforhumanrights,aswellasacommitmentto

theenvironmentandtothebattleagainstcorruption.”VolkswagenSustainabilityReport2014,pageU3.

VolkswagenshockedtheworldonSeptember18,2015withitsresponsetotheU.S.EnvironmentalProtectionAgency’s(EPA)noticethatVolkswagen’s“cleandiesel”vehicleswerefoundtobeinviolationoftheCleanAirAct.Initsresponse,theGermanautomakeradmittedthatithaddeliberatelyequippeditslineofTurbochargedDirectInjection(TDI)dieselengineswithsoftwarethatwasintendedto“bypass,defeat,orrenderinoperativeelementsofavehicle’semissioncontrolsystem”duringemissionstesting.1Initialreportssuggestedapproximately500,000Volkswagendieselcars,modelyears2009through2011,wereaffectedbythedevice.Asthescandalcontinuedtounfold,theestimatednumberofvehiclesaffectedgrewto11millionvehicles,acrossmultiplebrandsworldwide.2Somereportershavereferredtothescandalas“Dieselgate,”athrowbacktotheWatergatescandalthatledU.S.PresidentRichardNixontoresignin1974.3TheSeptember2015announcementwasprecededbyaseriesofeventsthatbeganinearly2014whenU.S.andGermanresearchersfromtheInternationalCouncilonCleanTransportation(ICCT)conductedtestsondieselmodelsoftheVolkswagenPassat,Jetta,andtheBMWX5inhopesofconfirmingthatthe“cleandiesel”technologythesecarsincorporatedwasinfact“clean.”4ICCTenlistedthehelpofresearchersfromtheWestVirginiaUniversity(WVU)CenterforAlternativeFuels,EnginesandEmissions.Atthesametime,theCaliforniaAirResourcesBoard(CARB)wasconductingitsowntestsonthevehicles.TheICCT/WVUresearchersroadtestedtheirvehiclesunderrealdrivingconditions,whileCARB’stestswereperformedinalab.Theresultswereshocking.Ofthevehiclestestedontheopenroad,theJettaexceededU.S.emissionsstandardsby15to35timestheupperlimitandthePassattestedat5to20timesthestandard;theBMWX5passedtheroadtest.VehiclestestedbyCARBpassedalloftheemissionstests.5TheEPAandCARBwerenotifiedoftheresultsandopenedinvestigationsintothematter.Initially,Volkswagendeniedanywrongdoing.InDecember2014,Volkswagenissuedavoluntaryrecallofabout500,000vehiclesintheUnitedStates,citingasoftwareglitchasthereasonfortheemissionsproblemandimplementingasoftwarepatch.CARBcontinuedtestingtherepairedvehiclesandfoundlittleimprovement.InJuly2015,CARBandtheU.S.EnvironmentalProtectionAgencynotifiedVolkswagenthattheywouldnotcertifyitslineof2016TDIvehiclesunlesstheycomplywithemissionstandards.Itwasn’tuntilSeptember2015thattheCompany,unabletoexplainthetests,finallyadmittedthatthecarshadbeenintentionallydesignedtoprovideinaccurateemissionstestresults.OnSeptember23,2015,CEOMartinWinterkornreleasedastatementacceptingresponsibilityforthesituationandresignedhisposition.TheemissionsscandalledtosignificantfinancialconcernsforVolkswagen.Initialchargesof€6.7billioninthethirdquarterof2015haveledthecompanytopostofalossof€1.7billionrelatedtotherecalls.Thisfiguredoesnotincludefines,penalties,orcompensation,andanalystsareprojectingtotalcostsforthescandaltorisetotensofbillionsofEuros.In

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thefirsttwomonthsafterthescandalbroke,thecompany’smarketcapitalizationdropped40%andMoody’sdowngradedtheCompany’sratingonenotch.6IntheU.K.,oneofthecompany’sbiggestmarkets,salesdropped10%inOctoberand20%inNovember.IntheU.S.salesdeclined25%inNovember.EveninGermany,Volkswagen’shomemarket,salesdropped2%inNovember,althoughthatmarketgrew8.9%inthesameperiod.7OnSeptember25,2015,MatthiasMullerwasnamedthenewCEOofVolkswagen.Hiseverymovewillbescrutinizedasthecompanyfacescriticismfromthenearly11millionownersofvehiclesaffectedbythe2015dieselscandal.PreviouslyheenjoyedanuntarnishedreputationandmanyyearsofsuccessatPorsche.However,hewillhavemanyhurdlestoovercomeasheworkstore-establishVolkswagen’sreputationforenvironmentalfriendlinessandrestoretheconfidenceofconsumers,employees,governmentregulators,andthegeneralpublic,inadditiontodevelopingastrategytocontinuegrowingthecompany’ssalesinahighlycompetitiveinternationalindustry.

COMPANYBACKGROUNDThehistoryofVolkswagendatesbackto1937Germany,whereacompanycalled“DeutscheArbeitsfront”wastaskedwithcreatingavehicleaffordableenoughforeveryGermanfamily.8Shortlythereafter,duringWWII,workersfromconcentrationcampsbuiltcarsfortheGermanarmy.Afterthewar,thefactorywastakenoverbytheBritishmilitaryandusedtoproduce“Volkswagen”vehicles,whichinGermanmeans“People’sCar.”Forthenexttenyears,controlofthecompanyswitchedhandswhilethe“Beetle”modelbecameincreasinglypopular.ThenextsevendecadesforVolkswagenwerefullofacquisitionsandseverallegalbattlesthatultimatelyresultedinanautomobileempireincluding12world-renownedbrands:Audi,Bentley,Bugatti,Lamborghini,Porsche,Ducati,Seat,Skoda,Scania,Man,VWCommercialVehicles,andVolkswagen.In2014,Volkswagenwasoneofthelargestautomobilefirmswitha13%globalmarketshareforpassengercars.Itproduced41,000vehicleseveryweek-dayinits119productionplants.Thatsameyearitsold10.1millionvehicles.“Strategy2018”InDecember2007,underthedirectionofthenCEOMartinWinterkorn,theVolkswagengrouplaunchedanincrediblyambitiousgrowthstrategycalled“Strategy2018.”ThisstrategyfocusedonthefollowingfourstrategicgoalsintendedtodriveVolkswagentothetopoftheglobalautomobileindustry:

• Volkswagenintendstodeployintelligentinnovationsandtechnologiestobecomeaworldleaderincustomersatisfactionandquality.

• Thegoalistoincreaseunitsalestomorethan10millionvehiclesayear;inparticular,Volkswagenintendstocaptureanabove-averageshareofgrowthinthemajorgrowthmarkets.

• Volkswagen’saimisasustainablereturnonsalesbeforetaxofatleast8%soastoensurethattheGroup’ssolidfinancialpositionandabilitytoactareguaranteedevenindifficultmarketperiods.

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• Volkswagenaimstobecomethetopemployeracrossallbrands,inallcompaniesandregions.Thisisnecessaryinordertobuildafirst-classteam.9

Theultimategoalof“Strategy2018”wasto“positiontheVolkswagenGroupasaglobaleconomicandenvironmentalleader…thebestautomakerintheworldby2018.”10InaninterviewwithForbesin2013,WinterkornsaidthegoalwastomakeVolkswagen“theworld’smostprofitable,fascinating,andsustainableautomobilemanufacturer”by2018andhighlightedthegoalofhavingthemostsatisfiedcustomersandemployeesintheindustry.Untilrecently,Volkswagenwaswellunderwaytoachievingthesegoals,havingachievedover10millionunitsalesin2014,morethanhalfofwhichwereattributedtotheVolkswagenPassengerCarsbrand.However,thesuccesswasshort-lived.OnOctober26,2015,Toyotaofficiallyreleaseditssalesnumbersforthefirstthreequartersof2015;Volkswagenhadfallenbehind.11

OPERATIONSANDINNOVATIONTheVolkswagenGroupiscomprisedoftwomaindivisions:theAutomotiveDivision,forwhichtheyaremostwell-known,andtheFinancialServicesDivision,whichmanagesthefinancing,leasing,insuranceandotherbankingactivitiesoftheCompany.TheFinancialServicesDivisionalsoprovidesfinancialservicesandlendingtocustomersanddealerships.TheAutomotiveDivision,whichasofDecember31,2014accountedfor87%oftheCompany’soperatingprofits(€10,997m),isfurtherdividedintothePassengerCarsgroupandtheCommercial/PowerEnginegroup.96%oftotalCompanysalesareattributedtothePassengerCarsgroupand,amongthecompany’sbrands,Volkswagenpassengercarswerethetopsellingvehicleat56%oftotalvehiclesalesintheCompanyin2014.Approximately43%ofvehiclesalescamefromEurope,40%fromAsia-Pacific,9%fromNorthAmerica,and8%fromSouthAmericain2014(seeExhibit1).AccordingtotheCompany’swebsite,asofMay26,2015,VolkswagenAGoperated119productionplantsin31countriesacrossEurope,theAmericas,Asia,andAfrica(seeExhibit2).Itsvehiclesaresoldin153countriesandtheFinancialServicesDivisionmanagesoperationsforover51countries.In2014,Volkswagenhadthestrongestmarketsharepresence,intermsofvehiclessold,inEurope(seeExhibit3).ThetypicalVolkswagenend-consumerisbetweentheagesof19and32,isfinanciallyconscious,andvaluessafetyandreliability.12Thereareover2,600Volkswagendealershipsworldwide.13Forthepast65yearsVolkswagenhasbeenaddingbrandstoitsportfolio.TheCompany’smostrecentmoveinvolvedatenderoffertoScaniaAB’sshareholdersforallsharesoutstanding,whichwasapproved.VolkswagenintendstocontinueinternationalexpansioneffortsinChinawithitselectricandplug-invehiclesaswellasfocusonproductinnovations,includingpiloteddriving,lightweightmaterialsforvehiclebody-shells,andemergencyassisttechnologythatattemptstoawakenadriverthathasfallenasleep.Thecompanyalsointendstogrowthefinancialservicesgroupthroughjointventurestocontinuewhatitcallsitsfinancial“internationalizationtrajectory.”AnexampleofthistrajectoryistheVolkswagenFinancialServicesSouthAfricajointventure,whichstartedinthespringof2015andhelpedtheGroupincreasetheirfinancialfootprint.

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InnovationisanimportantpartoftheVolkswagenstrategy.Forexample,in2012VolkswagenAGintroducedtheMQB(ModularTransverseMatrix)platform,whichallowsthecompanytosharemodularconstructionofseveralautomobilesandintegrateproductionacrossdifferentmodels,brands,andvehiclesizes;specificallytransverse,front-engine,andfront-wheeldriveautomobiles.14UsingMQB,thecompanywillultimatelybeabletobuildallofitsvehiclesfromfourbasic“kits”andeasilyexchangecommoncomponentssuchasdiesel,hybrid,orelectricdrivetrainsforgasolineenginesbasedonconsumerdemand.Streamliningefficiency,thecompanyexpectstoreducecarproductiontimeby30%.15Inarecentinvestor’spresentationataJ.P.MorganAutoConference,Volkswagenshowedthatitiscontinuingtorolloutthetoolkitstrategyacrossitsdifferentsegmentsandregionswhilerealizingfurthereconomiesofscaleinunitcost.16Additionally,VolkswagenwillbefurtheringitsworkwithDaimlerAGtoproducetheCrafterdeliveryvan,whichwillcontinueinto2016.

ACLOSERLOOKATTHECOMPANYVolkswagenisapubliclytradedcompanyinwhichPorscheAutomobileHoldingSEholdsthelargestportion(31.5%)ofthe475,731,296sharesoutstandingasofDecember31,2014.ThecurrentvotingdistributiongivesPorsche50.73%ofthevotingrights.Inexchangeforthisvotingpower,VolkswagenappointsmemberstoPorsche’sexecutiveboard.Volkswagen’sorganizationalstructureincludestherecentlyelectedCEO,MatthiasMuller,andsevenmembersoftheManagementBoard.ReportingtotheManagementBoardaretwentymembersoftheSupervisoryBoardwhoareresponsibleformonitoringmanagement,approvingimportantcorporatedecisions,andappointingthemembersoftheManagementBoard.17AlistingofSupervisoryBoardMemberscanbefoundinExhibit4.OneofthegoalsoftheGroup’s“Strategy2018”istobeatopemployer.Thecompanyhasdefinedbeinga“topemployer”as1)attractiveemployment,2)jobsecurity,3)goodworkingclimatethroughleadershipandcooperation,4)remunerationinlinewithperformance,5)personaldevelopmentopportunities,and6)productandcompanyimage.18AsofDecember2014,almost113,000associateswereemployedatthesiteofVolkswagenAGandanother480,000wereemployedworld-wideundertheVolkswagenCorporation,anincreaseof4.7%from2013.AccordingtotheCompanywebsite,femalesmakeup16.2%oftheworkforce,3.5%arepart-timeworkers,andtheaverageageofanemployeeis42.8years.Volkswagenvaluestheopinionsofitsemployees,andin2014nearly443,000Volkswagenassociateswereabletomaketheirvoiceheardbyparticipatinginasurveycalled“thebarometerofopinion.”Managementgeneratedareportforeachbusinessareaandsupervisorsreviewedtheresultswiththeirdirectreports.Thecompanyusesarewardsystemtoencourageemployeestothinkcreatively.Employeesarerewardedforsubmittingnewideas.Todate,over2millionideashavebeensubmittedandthecompanypaysoutover€8minbonusesannually.Volkswagenisalsocommittedtoinvestingintheskillsandcompetenceofitsemployees,strivingtoprovidepersonalandprofessionalprospectsatalllevels.Volkswagennotonlyprovidestrainingopportunitiesforalllevelsofassociates,fromtraineestoexecutives,but

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alsohelpsdevelopuniversitygraduatessotheyarereadytostartatVolkswagenwhentheygraduate.Thecompanyalsoprovidestheopportunityforassociatesthathaverecentlycompletedthepropertrainingtotravelabroadandworkinanothercountryforaspecifiednumberofmonths.Thereisalsoacommitmenttotheadvancementofwomenintheorganization.TheCompanyplansto“lifttheproportionoffemaleexecutivesinthecomingyears.”19SocialResponsibilityForyearsVolkswagenhasfocusedonwhatitconsidereditsstrengthandcompetitiveadvantage:anattractiveandenvironmentallyfriendlyrangeofautomobiles.20TheCompany’s2014annualreportincludesinitiativestoreduceCO2gasesandtoberesponsiblestewardsoftheenvironment.ExamplesoftheseinitiativesaretoincreaseridesharingincountriessuchasChinaandtoincreasethenumberofelectricvehiclesontheroad.Theannualreportalsodedicatessectionstocorporateandsocialresponsibilityandtoutsmanagement’scommitmenttoethicalpractices.Tosupportits“environmentallyfriendly”emphasis,Volkswagenhasairedcommercialsthatclaimitsvehiclesemitlessgreenhouse-gasemissionswhilemaintainingasatisfactorylevelofacceleration.21Inthe1960s,thefirstU.S.adcampaignsurgedpotentialbuyersto“ThinkSmall”andbuytheBeetle.In2010,Volkswagenlaunchedthe“ThinkBlue”campaignasawayto“promoteeco-friendlydrivingandgreeninitiatives”andintroducedenvironmentallyfriendlyproducts,including“cleandiesel,”andothertechnologiesunderthe“BlueMotion”label.22Otherrecentadcampaignsfurthershowcasedthecompany’s“clean-diesel”technology.Volkswagenwasawardedthe“GreenCaroftheYear”awardbytheGreenCarJournalin2009and2010fortheJettaTDICleanDieselandAudiA3TDICleanDiesel,respectively;thefirstnon-electricandnon-hybridmodelstobeselectedfortheaward.23Volkswagen’sCodeofConducthighlightstheCompany’sresponsibilityfor“continuousimprovementoftheenvironmentaltolerabilityofourproducts”andfor“makingecologicallyefficienttechnologiesavailablethroughouttheworld.”24ItisaGroup-wideguidelinethatoutlinesthestrategyforcorporateglobalandlocalresponsibilityandforwhicheachindividualisequallyresponsibleforcompliance.TheCodeofConductstatesthattoachievethegoalofbeingnumberoneamongtheworld’sautomobilemanufacturers,theymust:

• Actresponsibly,forthebenefitofourcustomers,shareholders,andemployees,• Considercompliancewithinternationalconventions,laws,andinternalrulesto

bethebasisforsustainableandsuccessfuleconomicactivities,• Actinaccordancewithourdeclarations;and• Acceptresponsibilityforouractions.

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MajorBrandsAlthoughVolkswagenhas12well-knownbrandsinitsportfolio,itstwomarqueebrandsareVolkswagenandAudi.VolkswagenVolkswagenhasrisentobecomeoneofthemostrecognizablebrandsintheworld.In2014,thegoodwillvaluationofthebrandwas$23billion.25Over4.5millionVolkswagenPassengercarsweresoldin2014.TheVolkswagenbrandismadeupof23differentmodelsandoffersavastarrayofvehiclestyles:sedan,hatchback,stationwagon,MPV,SUV,coupe,andcabrio.ThetopfivemodelsproducedaretheGolf,Jetta,Polo,Passat,andTiguan.TheVolkswagenGolfcelebratedits40thanniversaryin2014.Marketedas“TheHatchback,”theGolfcomesina2-Doorand4-Doormodel.ThemajorityoftheGolfdeliveriesweremadetotheAsia-Pacificregion(48.6%)in2014.26Ofcourse,Volkswagen’smostrecognizableandiconiccaristheVolkswagenBeetle.Itgrewinpopularityafterthe1968movie“LoveBug”wheretheBeetle“played”acharacternamed“Herbie.”Fouryearslater,theBeetlebroketherecordformostvehicleseverproduced,knockingtheFordModelTtosecondplace.27AudiTheAudibrandistheVolkswagenGroup’smostprofitableautomobileandthesecondlargestintermsofabsolutevehiclesales.Thebrandismadeupof12differentmodels.Itstopfivemodels,inorderofunitsproduced,aretheA3,A4,A6,Q5,andQ3.TheAudibrandisofferedinsixdifferentvehiclestyles:sedans,SUVs,crossovers,wagons,coupes,andconvertibles.In2014,theA3e-tronhadthemostdeliveriestotheEurope/OtherMarketsregionwith47%oftotaldeliveries.28In2015,deliveriestocustomersoftheAudibrandincreasedby3.8%over2014.In2014thecompanyspent$159millioninmeasured-media,about$260millionlessthanitspentontheVolkswagenbrand.29In2014,theAudibrandgenerated20milliononlineviews,andabout500,000Facebooklikes,shares,andYouTubecomments.30FinancesIn2014,Volkswagenreportedsalesrevenuesof€202.5billion,up2.8%year-over-yearandoperatingprofitsup8.5%to€12.7billion.2014operatingmarginsalsoimprovedfrom5.6%to6.3%.ClosinginononeofitsStrategy2018targets,Volkswagen'sreturnonsalesbeforetaxrosealsofrom6.3%to7.3%in2014.Accordingtothe2015InterimReport,Volkswagencontinueditsstronggrowthinthefirsthalfof2015withan8.5%increaseinsalesrevenuefromtheprioryear.31Volkswagen’sfive-yearconsolidatedfinancialstatementscanbefoundinExhibit5.Thecompanymaintainsabalanceoffocusonitsmostprofitablebrands(Audi,Porsche,andVolkswagenPassengercars)andinvestinginthefuture.Maintainingacapitalexpenditure-to-salesratiobetween6and7%,theautomotivedivisionhasmadeinvestmentsininnovativetechnologies,sizeofitsglobalproduction,andnewproducts.

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THEAUTOMOBILEINDUSTRY

Thematurityoftheautomotiveindustryhasfosteredthecreationofbrandswithdecadesofhistoryandstrongcustomerloyalty.Theautomobileindustryiscapitalintensive,andcurrentcapitalinvestmentstendtofocusonautomatedprocessesandoperationalefficiencies,includingtheretoolingoffactoriesandequipmenttoaccommodatefortighterregulationsandchangingcustomerdemand.RevenuesfortheGlobalCarandAutomobileManufacturingindustryhavebeengrowingat1.6%annually,increasingfrom$1.9trillionin2009tonearly$2.5trillionin2015,andareexpectedtogrowby1.9%annually,risingto$2.7trillionthrough2020.32Althoughrevenuesareincreasing,tighterregulationandincreasingcostsforinputssuchassteel,plastic,andothercomponentswillputdownwardpressureonindustryprofits.Lowerfuelpricesandglobalinterestrateswillhelptobolsterconsumerdemand.SomekeyratiosfortheautomobileindustryarecontainedinExhibit6.GlobalCompetitionInorderofmotorvehicleproduction,thefivelargestcompetitorsintheglobalautomobileindustryareToyota(10.4millionunits),Volkswagen(9.8millionunits),GeneralMotors(9.6millionunits),Hyundai(8.0millionunits),andFord(5.9millionunits).33Eachofthesecompanies,likeVolkswagen,hasbeenthesubjectofatleastonemajorpubliccontroversyinthepast.ToyotaMotorCorporationThecompany’sfirstautomotiveprototypewasproducedin1935byKiichiroToyoda.ItspawnedfromToyodaAutomaticLoomWorks,thecreationofKiichiro’sfather.Ayearlater,thecompanywasrenamedToyota.Thenewnamerequiredonlyeightstrokestobewritten–anumberthoughttobringgoodluckinJapan.In1937,theToyotaMotorCompanywasfounded.34Thecorefoundingprinciplesofthecompanyarerespectingpeopleandstrivingforcontinuousimprovement.Today,thecompany’smostpopularbrandsareToyota,Lexus,andDaihatsu.Thefirm’scoreproductsaremediumandsmallcars.IntheUnitedStates,itcommandsa60%marketshareinthehybridmarket,ledbyitsbrandthePrius.Combined,thecompanysoldover10millionvehiclesin2013,makingitthefirstautomakertosellabove10millionvehicles.35In2014,Toyotahadnetrevenuesof25,691.9billionyen,equatingto$208.4billion.36InSeptemberof2009,theU.S.NationalHighwayTrafficSafetyAdministrationalertedthepublicthatthefloormatsinToyotaautomobilesmaytriggerthegaspedaltorapidlyaccelerate.Shortlythereafter,thecompanyrecalled3.8millioncars.Lateracknowledgingthatitmaybeamechanicalissue,Toyotaaddedanadditional2.3millioncarstotherecall.In2014,theU.S.Attorney’sOfficefinedToyota$1.2billionforappearingtodeceivethepublic.37

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GeneralMotorsCorporationGeneralMotors(GM)wasfoundedin1908byW.C.Durant.BasedinDetroit,Michigan,theautomakerisknownforbrandssuchasChevrolet,Buick,GMC,andCadillac.38Duetooperationallossesbeginningin2005andaChapter11filingin2009,thecompanyhasreceivedmorethan$30billioninaidfromtheU.S.federalgovernment.Inexchangeforthebailoutfunds,thecompanywasforcedtocompletelyrestructure.In2014,GeneralMotorshadnetrevenuesof$156billion.InMarch2014,theJusticeDepartmentlaunchedacriminalinvestigationintoadelayedignitionswitchrecall.Bytheendofthemonth,GMinitiatedanignitionswitchrecallfor2.6millioncars.GMhadknownthattherewasapotentialissuewiththeignitionswitchsinceearly2011.Despitetherecallcrisis,TimMahoney,Chevrolet’sChiefMarketingOfficersaid,“thelatestdatathatwe’veseenisnomajorshiftinpurchaseconsideration…Ithinkwe’reholdingupprettywellinspiteofitall.”39HyundaiMotorGroupHyundaiisheadquarteredinSeoul,SouthKorea.Incorporatedin1967,thecompanyhasninemodelsofsub-compactandlargecars.Brandsinclude:theEquus,theGenesis,theSonata,theElantra,theSantaFe,theVeloster,thei30,andtheTucson.Eachofthesemodelshaswonnumerousrecognitionsforsafetyanddesign.40HyundaiMotorGroupalsoownsKiaMotorsCorporation,whichistheoldestautomobilemanufacturerinSouthKorea.Hyundaireportednetrevenuesof$81billionin2014.In2012,theU.S.EnvironmentalProtectionAgency(EPA)claimedthatHyundaihadinflateditsfueleconomybenefit.TheEPAestimatedthatthecompanyhadmisledthepublicon900,000vehiclesoverthecourseoftwoyears.Hyundaiadmittedto“proceduralerrors”initstestingandreleasedupdatedfueleconomyestimates.This“proceduralerror”spannedacrossawiderangeofmodels,includingtheHyundaiAccent,KiaRioandKiaSorento.Tofixtheproblem,thecompanyissuedadebitcardtocustomersthatreimbursedthemforthedifferenceintheEPAfueleconomyrating.Whilethecontroversymayhavetemporarilydamagedthereputationofabrandthatwasbuiltonsuperiorfueleconomyratings,thecompanyremainedresilient.41FordMotorCompanyFordisheadquarteredinDearborn,Michigan.UnlikeGeneralMotors,itdidnotreceivedirectfederalaidduringthe“GreatRecession”,althoughitdidsecurea$5.8billionloanfromtheU.S.DepartmentofEnergysoitcouldremainsolvent.42Themajorbrandsinthecompany’sportfolioareFordandLincoln.ThecompanyhasbeenproactiveinidentifyingwaystoimprovefueleconomybyintroducingEcoBoost–atechnologythatFordclaimsreducesemissionsby15%andadds20%tofueleconomy.43In2014,FordMotorCompanyhadnetrevenuesof$135.8billion.InAugust1978,anautomobileaccidentinvolvingtheFordPintoledtothedeathofthreeteenagegirls.Thisledtothefirst-evercriminalhomicidechargeagainstanAmericancorporation.Ayearbefore,MotherJoneswroteascathingexposeonthecompany–

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claimingthatFordknowinglyputadangerouscarontheroad.Fordjustifiedtheproductionofthecarwithitsowncost-benefitanalysis.Initsanalysis,Fordshowedthatthecostofahumanlife,whichtheyestimatedat$200,000,didnotjustifytheadditional$11neededtopreventthegastankfromrupturing.Thesameyear,FordrecalledallFordPintostomodifythefueltank.44IndustryForcesSeveralpowerfulforceshaveasignificantinfluenceontheglobalautomobileindustry.Amongthemarerapidlyadvancingtechnologies,politicalinfluences,changesinthesupplychain,andunions.TechnologyTechnologyisasignificantpartoftheautomobileindustry.Itdriveschangesnotonlyinautomobileproduction,butalsoinconsumerpreferencesandgovernmentregulations.Productioncapabilitieshavechangedsignificantlyduetoautomationandimprovementsintechnology.Asaresult,laborproductivityimproved45%between2003and2013.45Additionally,computertechnologyisbeingusedinproductdesigntoassistwithmaterial,fuelefficiency,emissions,safety,andproductqualitydesignchoices.Technologyhasalsoallowedforsignificantimprovementsinsafetyfeaturessuchasanti-lockbrakes,airbags,cruisecontrol,andotherautomotiveandsafetyfunctionsthatconsumersareseeking.Additionally,withdecreasingcostsofcomputing,automobilemanufacturersarecompetingtoofferthemostcomprehensiveanduser-friendly“infotainment”systemsintheirvehiclesthatarecompatibleacrossthechanginglandscapeofmobiledevicesandtechnology.Alternativefuelsystemssuchashybrid,hydrogen,andelectricarealsogaininginpopularity.Thesearenotnecessarilynewinnovations;however,substantialimprovementsinthesetechnologiesareleadingtobettervehicleperformance,decreasedcostandincreasedpopularityofelectricvehicles.SourcesatKellyBlueBookreportedthatwhileoverallvehiclepriceshaveincreased1.2%over2014,thepricesforelectricvehicleshavedecreasednearly10%.46Furthermore,carssuchastheTeslaModelSareliftingperformancestandardsforthesevehicleswhenitcomestodistance,speed,andpower.Comparedtotheglobalautomobilemarket,themarketforelectricvehiclesissaidtobeintheearlystagesofdevelopment.Attheendof2012,electricvehiclesalesaccountedforonly0.02%ofglobalvehiclesales.47Industryanalystsexpecttoseegrowthratesashighas35%overthenextfewyearsleadingelectricvehiclestoaccountforupto3%oftheglobalvehiclemarketbytheendof2020.48PoliticalInfluences Governmentregulationoftheglobalautomotiveindustryismoreandmorestringentinmosteconomies.Mostregulationssurroundsafetyfeatures,fueleconomy,emissions,andpollutioncontrol.Forexample,eightU.S.stateshaveadoptedrulesthatwillrequireapproximately15%ofallnewcarssoldtobezero-emissionsvehiclesby2025.49Thestatesthatparticipateinthisprogramalsohaveinitiativestopurchasethesezero-emissions

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vehiclesfortheirpublicfleets.Othergovernmentinitiativesareaimedatreducingelectricityratesforhomechargingstations,buildingmoreoptionsforpublicchargingstations,andofferingotherfinancialincentivesforpurchasesofthesevehicles.TheUnitedStates,theEuropeanUnion,andAsiaimposedifferentsafety,emissions,andfueleconomyregulationsonautomakersintheirrespectiveregions.50Governmentsareseekingwaystobecomelessdependentonforeignsourcesoffuelandenergyandareadoptingtougherfueleconomystandardsfornewvehicles.Between2012and2016,carcompanies’fleetswillberequiredtoachieveanaverageof35.5milespergallon.51In2010theInternationalEnergyAgency(IEA)establishedtheElectricVehiclesInitiative(EVI),“amulti-governmentpolicyforumdedicatedtoacceleratingtheintroductionandadoptionofelectricvehiclesworldwide.”TheEVIissupportedworldwidewith15“membergovernmentsfromAfrica,Asia,Europe,andNorthAmerica”and“seekstofacilitatetheglobaldeploymentofatleast20millionelectricpassengervehiclesby2020.”52TheEVIisacollaborativeplatforminwhichgovernmentsandcompaniescansharegoals,strategies,bestpractices,researchanddevelopment,andotherinformationrelativetotheindustry.SupplyChainTrendsSignificantchangeshaveoccurredintheautomobilesupplychainforbothpartssuppliersandend-consumers.Onthesupplierside,“megasuppliers”haveemergedduetooverseasexpansionsandfactoriesbeingbuiltinemergingmarkets,contributingtotheincreasedcontributionandpowerofautomotivesuppliers.53Volkswagen’ssuppliersincludeContinental,Bosch,Bridgestone,andJohnsonControls.In2014,Continentalwastheleadingsupplierofautomobilemanufacturerswithrevenueof34.5billionEuros.Itprovidesbrakesystems,tires,tachographs,engineinjectionsystems,andvehiclestabilitycontrolsystems.54Thefirmisabletomaintainleadershipintheindustrythroughresearchanddevelopment,whichis6%ofitsannualsales.55Boschisaleadingsupplierofbothservicesandtechnologiesthroughitsoperationin150countriesaroundtheworld.Bridgestone’stiressalesaccountfor84%ofitsbusiness.LikeBosch,thecompanyhasoperationsin150countries.JohnsonControlsisamassiveglobalsupplierofautomotivebatteries,seatingcomponentsandautomobilesystems.56AllofthesesuppliershavesalesinthetensofbillionsofEuros.Fortheend-consumer,thecar-buyingprocesshaschangeddramatically.WiththeaccessibilityoftheInternetandtheabilitytoshoponlineforavehicle,thecarsalespersonlessrelevant,especiallyforVolkswagen’stargetdemographic.Efficiency-consciousconsumersarefocusedongettingtherightcarfortherightpricewithouttheextrahassleandarearrivingatthedealershiparmedwithinformation.AlisonSpitzerofSpitzerAutoGroupstatesthat,"Thewholeprocessofbuyingacarhasbeenflippedflopfromwhatitusedtobe.Todaycustomersfindthecarfirst,thenthedealership."Theshiftinthisprocesshasgiventheconsumertheadvantage,astheyhaveaccesstothesame“inside”knowledgeassalespeoplesuchasinvoiceprice,reliability,andconsumerratings,whichcarsalespeoplehistoricallyhavebeenabletoleverage.Thisshifthasmadeitharderfordealershipstosellcarsattheiridealprice,leavingthemscramblingtomakeaprofitontheirvehicles.AccordingtotheWallStreetJournal,“averagegrossprofitonanew-carsaledroppedto$1,283lastyearfrom$1,531in2002,accordingtotheNationalAutomobile

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DealersAssociation.”57Consequently,dealershipsareputtingmorepricepressureonautomobilemanufacturers.UnionInfluencesUnioninfluencevariessignificantlybycountry.VolkswagenhasastrongpresenceinGermany,andthelargestunioninEuropeistheGermanConfederationofTradeUnions,orDeutscherGewerkschaftsbund(DGB),whichconsistsofover6millionpeople.58IGMetall,orIndustriegewerkschaftMetall,istheindustrialunionofmetalworkersandconsistsofauto-industryworkersinEurope.IGMetallisthelargestandmostinfluentialtradeunionwithintheDGBandrecentlywonawageincreaseof3.4%.Thepayincrease,whichoccurredinFebruaryof2015,wasaboveGermany’sinflationrateandwasexpectedtohelpboosttheeconomy.RomanZitzelsberger,headoftheBaden-WuerttembergbranchofIGMetallstatedthattheagreementisa“satisfactorycompromise”and"thisdealguaranteesthatthemostimportantengineoftheeconomyatthemoment,privateconsumption,willcontinuetoperformatahighlevel.”IGMetallworkscloselywithVolkswagenandhasseveralmembersonVolkswagen’ssupervisoryboard.59InAugust2015,IGMetall’sformerleaderandcurrentsupervisoryboardchairman,BertholdHuber,andtheVolkswagenGroupworkscouncilchairman,BerndOsterloh,discussedmakinglargejobcutsinordertoincreaseVolkswagenprofits.Volkswagen“hasalwaysplayedavanguardroleinthetransformationoftheunions.Itwasregardedfordecadesastheepitomeofwhatisalternatelyreferredtoasthe“Germanco-determinationmodel”,“GermanyPLC”or“co-management.”Nowhereistherelationshipbetweenexecutiveboard,tradeunion,workscouncilandtheworldofpoliticsascloseasitisatVW.”60IntheUnitedStates,unionsarelessinfluential.TheUnitedAutomobileWorkersUnionrepresentsthebiggestU.S.carmanufacturers:Ford,GeneralMotors,andChrysler.Theunionhashadaninfluentialroleinensuringthefinancialviabilityofthe“BigThree”inrecentyears.AccordingtoTheDeclineandResurgenceoftheUSAutoIndustryreport:“theunionagreedtoalowerentrywagein2007of$14.20(approximately60percentoftheregularproductionstartinghourlywage)forupto20percentoftheworkforce;afterthisthresholdwasreached,workerswouldreceivethehigherregularwage.”BecauseoftheseconcessionsmadebytheUAW,thewagegapbetweenthethreebiggestUnitedStatesautomanufacturersandforeignmanufacturersisslowlydecreasing.61TheseconcessionshaveleadtothereporteddeclineoftheUAW’spowerovertheautoindustryinrecentyears.“AccordingtoBloomberg,UAWmembersproducedonly54%ofthecarandtrucksmadeintheUnitedStateslastyear.Thatcompareswith85%ofcarsandtrucksbuiltintheU.S.in1999.”62Itisspeculatedthatthedeclineintheunion’spowerismainlyduetoforeignautomakersover-takingtheU.S.industryandbuildingplantsthroughoutthecountry,especiallyintheSouth.

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WHAT’SNEXTFORVOLKSWAGEN?

The“Dieselgate”scandalexposedunethicalanddeceptivepracticesatVolkswagen,andhurtitsbrandimagearoundtheworld.NewCEOMatthiasMullerstatedthathis“mosturgenttaskistowinbacktrustfortheVolkswagenGroup–byleavingnostoneunturnedandwithmaximumtransparency.”63Amongeffortstorepairrelationshipswiththekeystakeholdersaffectedbythescandal,thecompanyhaswithdrawnitsdieselcarsfromthemarketandisworkingthroughplansforrecallingtheaffectedvehiclesthatarealreadyontheroad.Thecompanyhasalsoundertakenanumberofinitiativestorepairimportantrelationshipswithcustomersanddealers.Theseattemptsincludereimbursementtodealersforholdinginventoryandnewdealershipincentivesconnectedtosalesofgasoline-poweredcars.64Forcustomersaffectedbythescandal,Volkswagenhasissueda“GoodwillPackage”includinggiftcards,creditsforservicesorproducts,andathree-yearextensionofroadsideassistance.Perhapsthisisenough.Volkswagen’smajorcompetitorshavealsobeencaughtdoingsociallyirresponsibleorevenreprehensiblethingsinthepast,andseemtohaveweatheredtheirstormsfairlywell.Shouldthiscurrentcrisis,althoughunfortunate,beallowedtodistractthecompanyfromothercriticalissues,suchasrapidlyadvancingtechnologies?WhatisthebiggerpicturewithregardtothefutureofVolkswagen?Whatshoulditsstrategicemphasisbemovingforward?Andshouldthecompanycompletelyabandondieseltechnology?Inshort,howcanthishighlysuccessfulcompanygetbackonthepathtowardsbecomingthebestautomanufacturerintheworld?

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EXHIBIT1

KEYFIGURESBYGLOBALREGION

ThousandVehicles/€million

VehicleSales SalesRevenue

2014 2013 2014 2013

Europe/Othermarkets 4,430 4,209 122,858 117,062NorthAmerica 879 901 27,619 27,434SouthAmerica 794 987 13,868 17,495Asia-Pacific 4,114 3,632 38,113 35,016VolkswagenGroup 10,217 9,278 202,458 197,007

Source:VolkswagenAG.2014.AnnualReport

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EXHIBIT2VOLKSWAGENGLOBALPRODUCTIONBREAKDOWN

NorthAmerica6%

Europe51%

SouthAmerica6%

SouthAfrica1%

Asia36%

VolkswagenVehicleProductionLocations

(asapercentoftotalproductionin2014)

Source:VolkswagenAG.2014.AnnualReport

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EXHIBIT3

VOLKSWAGENAGPERCENTOFMARKETSHAREBYREGION

Region 2014 2013 WesternEurope 24.6% 25.0% CentralandEasternEurope 20.1% 17.4% NorthAmerica 4.5% 4.5% SouthAmerica 16.2% 17.5% AsiaPacific 12.6% 13.5%

Source: Volkswagen. 2015. Interim Report: January – September. Wolfsburg: Volkswagen AG.

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EXHIBIT4

THEMANAGEMENTBOARD

MatthiasMuller–ChiefExecutiveOfficerMatthiasMullerworkedforVolkswagenforalmost40yearsbeforehisappointmenttoCEOonOctober1,2015.BorninGermanyin1953,MullerheldmanyprominentpositionswithinVolkswagen,includinghisroleasPresidentofPorscheforfiveyears.MulleriscommittedtobringingmanyofthesuccessesheachievedatPorschetotheentireVolkswagenGroup.AsPresidentofPorsche,Mullerwasnotinvolvedinthedieselscandalthatisplaguingthecompany.Dr.HerbertDiess:Dr.Diessisanexpertinvehicletechnology.HewasappointedasamemberoftheBoardofManagementofVolkswagenAGandChairmanoftheBoardofManagementoftheVolkswagenPassengerCarsbrandinJuly2015.ProfessorJochemHeizmannProfessorHeizmannwasappointedasamemberoftheBoardofManagementofVolkswagenAGwithresponsibilityfor'China'inSeptemberof2012.HeizmannwenttoschoolforindustrialengineeringandhasexperiencewithGroupCommercialVehicles,GroupProduction,ProductionandLogistics.AndreasRenschlerAndreasRenschlerwasappointedasamemberoftheBoardwithresponsibilityforCommercialVehicleseffectiveinFebruary2015.Renschlerhasexperienceinbanking,businessengineering,andbusinessadministration,andheldmanyexecutivelevelpositionsatDaimlerChryslerAG.FrankWitterWitterholdsadegreeinbusinessadministrationandhasbeenwiththeVolkswagenGroupsince1992.Hehasexperienceincapitalmarkets,andheldmanyexecutivelevelrolesinVolkswagenofAmerica.Witterbecameamemberoftheboardin2008andwasassignedresponsibilitiesforFinanceandControllinginOctober2015.Dr.FranciscoJavierGarciaSanzDr.SanzhasabackgroundinbusinessmanagementandwasappointedtotheBoardofManagementofVolkswagenAGwithresponsibilityforProcurementin2001.ProfessorHorstNeumannProfessorNeumannstudiedEconomicsandSocialSciencesandreceivedanhonoraryprofessorshipfromTongjiUniversity,Shanghai,whichsharedaclosescientificpartnershipwithVolkswagenformanyyears.InJuly2002Dr.NeumannwasappointedaMemberoftheBoardofManagementofAUDIAGandbecameaMemberoftheBoardofManagementofVolkswagenAGwithresponsibilityforHumanResourcesin2005.ProfessorRupertStadlerProfessorStadlerinitiallyjoinedAUDIAG,whereheassumedvariousrolesintheSalesandMarketingarea.DuringhiscareeratVolkswagenGrouphehashadexperienceintheControllership,Accounts,ProductPlanning,FinanceandPersonneldepartmentsbeforejoiningtheBoardin2010.

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EXHIBIT5VOLKSWAGENAG5YEARCONSOLIDATEDFINANCIALSTATEMENTS

VolkswagenAGFiveYearIncomeStatement

in€permillion YearEndingDecember31, 2010 2011 2012 2013 2014

SalesRevenue 126,875 159,337 192,676 197,007 202,458

CostofSales

(105,431)

(131,371)

(157,518)

(161,407)

(165,934)GrossProfit 21,444 27,965 35,158 35,600 36,524DistributionExpenses (12,213) (14,582) (18,850) (19,655) (20,292)AdministrativeExpenses (3,287) (4,384) (6,223) (6,888) (6,841)OtherOperatingIncome 7,648 9,727 10,496 9,956 10,298OtherOperatingExpenses (6,450) (7,456) (9,070) (7,343) (6,992)OperatingProfit 7,141 11,271 11,510 11,671 12,697ShareofProfitsandlossesofequity-accountedinvestments 1,944 2,174 13,568 3,588 3,988FinanceCosts (2,144) (2,047) (2,552) (236) (2,658)OtherFinancialResult 2,053 7,528 2,967 (465) 767FinancialResult 1,852 7,655 13,982 757 2,097ProfitBeforeTax 8,994 18,926 25,492 12,428 14,794IncomeTaxIncome/Expense (1,767) (3,126) (3,608) (3,283) (3,726)Current (2,963) (4,351) (4,196) (3,733) (3,632)Deferred 1,196 1,225 588 449 (94)ProfitAfterTax 7,226 15,799 21,884 9,145 11,068Noncontrollinginterests 392 391 168 52 84ProfitAttributabletoAGHybridCapitalInvestors

27 138

ProfitAttibutabletoVolkswagenShareholders 6,835 15,409 21,717 9,066 10,847

BasicEarningsperOrdinarySharein€ 15.17 33.10 46.42 18.61 21.84DilutedEarningsperOrdinarySharein€ 15.17 33.10 46.42 18.61 21.84BasicEarningsperPreferredSharein€ 15.23 33.16 46.48 18.67 21.90DilutedEarningsperPreferredSharein€ 15.23 33.16 46.48 18.67 21.90

Source:Volkswagen.AnnualReport2014,2012,2010.Wolfsburg:VolkswagenAG.

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VolkswagenAGFiveYearBalanceSheet

in€permillion YearEndingDecember31, 2010 2011 2012 2013 2014

ASSETS NoncurrentAssets IntangibleAssets 13,104 22,176 59,158 59,243 59,935

Property,Plant,Equipment 25,847 31,876 39,424 42,389 46,169LeasingandRentalAssets 11,812 16,626 20,034 22,259 27,585InvestmentProperty 252 340 433 427 485Equity-AccountedInvestments 13,528 10,249 7,309 7,934 9,874OtherEquityInvestments 640 3,049 3,870 3,941 3,683FinancialServicesReceivables 35,817 42,450 49,785 51,198 57,877OtherFinancialAssets 12,823 6,431 7,040 6,498OtherReceivables 1,582 1,671 1,456 1,654TotalOtherReceivablesandFinancialAssets 7,519 14,405 8,102 8,496 8,152NoncurrentTaxReceivables 689 627 552 633 468DeferredTaxAssets 4,248 6,333 7,915 5,622 5,878

TotalNoncurrentAssets 113,457

148,129

196,582

202,141

220,106

CurrentAssets Inventories 17,631 27,551 28,674 28,653 31,466

TradeReceivables 6,883 10,479 10,099 11,133 11,472FinancialServiceReceivables 30,164 33,754 36,911 38,386 44,398OtherFinancialAssets 4,253 5,872 6,591 7,693OtherReceivables 4,543 4,823 5,030 5,080TotalOtherReceivablesandFinancialAssets 6,605 8,796 10,695 11,621 12,773CurrentTaxReceivables 482 623 761 729 1,010MarketableSecurities 5,501 6,146 7,433 8,492 10,861Cash,CashEquivalents,andTimeDeposits 18,670 18,291 18,488 23,178 19,123

TotalCurrentAssets 85,936

105,640

113,061

122,192

131,102

TOTALASSETS 199,393

253,769

309,644

324,333

351,209

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YearEndingDecember31, 2010 2011 2012 2013 2014

EQUITYANDLIABILITIES Equity SubscribedCapital 1,191 1,191 1,191 1,191 1,218

CapitalReserves 9,326 9,329 11,509 12,658 14,616RetainedEarnings

72,341 71,197

OtherReserves

(459) (2,081)AccumulatedComprehensiveIncome 35,461 47,019 64,815 71,882 69,116EquityAttributabletoVWAGhybridcapitalinvestors

2,004 5,041

EquityattributabletoshareholdersofVolkswagenAG 45,978 57,539 77,515 87,733 89,991NoncontrollingInterests 2,734 5,815 4,310 2,304 198

TotalEquity 48,712 63,354 81,825 90,037 90,189

NoncurrentLiabilities NoncurrentFinancialLiabilities 37,159 44,442 63603 61,517 68,416

OtherNoncurrentFinancialLiabilities

2,547 2397 2,305 3,954

OtherNoncurentLiabilities 4,742 4,394 4675 4,527 4,238DeferredTaxLiabilities 1,669 4,055 9050 7,894 4,774ProvisionsforPensions 15,432 16,787 23969 21,774 29,806ProvisionsforTaxes 3,610 3,721 4,239 3,674 3,215OtherNoncurrentProvisions 11,170 13,235 14,373 13,981 15,910

TotalNoncurrentLiabilities 73,781 89,179

122,306

115,672

130,314

CurrentLiabilities PutOptionsandCompensation

RightsGrantedtoNoncontrollingInterestShareholders 3,638 3,703CurrentFinancialLiabilities 39,852 49,090 54,060 59,987 65,564TradePayoffs 12,544 16,325 17,268 18,024 19,530CurrentTaxPayables 286 844 238 218 256OtherCurrentFinancialLiabilities

4,888 4,425 4,526 7,643

OtherCurrentLiabilities 10,627 11,196 11,111 11,004 14,143ProvisionsforTaxes 2,077 2,888 1,721 2,869 2,791OtherCurrentProvisions 11,513 16,005 16,689 18,360 17,075

TotalCurrentLiabilities 76,900

101,237

105,513

118,625

130,706

TOTALEQUITYANDLIABILITIES

199,393

253,769

309,644

324,333

351,209

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EXHIBIT6INDUSTRYKEYFINANCIALSANDRATIOS

Volkswagen

(EUR) GM(USD) Toyota(JPY) Ford(USD) Hyundai(KRW)PeriodEnding 12/31/14 12/31/14 3/31/15 12/31/14 12/31/14UnitsSold(Mil) 9.8 9.6 10.4 5.9 8Revenue(Mil) 202,458.00 155,529.00 27,234,521.00 144,077.00 89,256,319.00GrossMargin% 18.00 8.90 19.80 12.40 21.40OperatingIncome(Mil) 12,697.00 1,530.00 2,750,564.00 3,745.00 7,549,986.00OperatingMargin% 6.27 1.00 10.10 2.60 8.50NetIncome(Mil) 10,847.00 3,949.00 2,173,338.00 3,187.00 7,346,807.00EarningsPerShare 4.37 1.65 687.66 0.80 13,518.50Dividends 0.81 1.20 200.00 0.50

PayoutRatio% 27.20 58.20 27.40 31.30 5.00Shares(Mil) 2,480.00 1,687.00 3,160.00 4,045.00 418.00BookValuePerShare 46.42 24.93 43.19 6.52 82.85OperatingCashFlow(Mil) 10,784.00 10,058.00 3,685,753.00 14,507.00 2,120,845.00CapitalSpending(Mil) (16,613.00) (7,091.00) (3,357,568.00) (7,463.00) (4,725,895.00)FreeCashFlow(Mil) (5,829.00) 2,967.00 328,185.00 7,044.00 (2,605,050.00)FreeCashFlowPerShare (0.92) 1.82 0.38 1.33 (6.43)WorkingCapital(Mil) 396.00 17,969.00 1,504,901.00 77,911.00 26,936,423.00

NetMargin% 5.36 1.80 7.98 2.21 8.23AssetTurnover(Average) 0.60 0.91 0.61 0.70 0.64ReturnonAssets% 3.21 1.63 4.87 1.55 5.24FinancialLeverage(Average) 3.90 5.01 2.84 8.41 2.55ReturnonEquity% 12.21 7.48 13.91 12.45 13.41ReturnonInvestedCapital% 5.32 3.78 6.27 2.47 6.68InterestCoverage NA 11.54 127.48 6.36 34.14

Source of data: Morningstar Investment Research Center database; OICA 2014 World Ranking of Manufacturers

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