Good morning, ladies and gentlemen, and I bid you welcome most warmly to Vosberg. Due to the current situation, we've resolved this year to hold our annual media conference in the virtual world. Health of everyone involved is simply a greater priority. Caifon Westenbostel for this reason apologizes for not being able to come. I will stand in for him before going back to my family.
Mr. Dies will first give you an overview of the past financial year and then Mr. Bitter will drill down into some detail and give you the gist of things. And then Mr. Dies will come back and round things off.
After the speeches, you can ask your question by the phone. The whole board will be there to answer your question.
Ladies and gentlemen, I too would like to bid you a warm welcome to the Annual Media Conference of Volkswagen AG, which in light of the corona pandemic is taking place in unusual format this year. During the health and safety of our employees and their families is the most important priority in this situation and the primary objective is to slow down the spread of coronavirus as much as possible. And to that end, we at Volkswagen have also taken a number of measures. Given the present significant deterioration in the sales situation and the heightened uncertainty regarding part supplies to our plants, Production is to be suspended very soon at our factories in the near future. Production will be halted at our Spanish plants, Setubal in Portugal, Bratislava in Slovakia and Lamborghini and Ducati in Italy before the end of this week.
Most of our other German and European plants will begin preparing to spend production as probably in the next 2 weeks. Plants not affected until further notice will be announced as soon as possible. But in China, on the other hand, with the exception of the plants in Changsha and Rongchi, as I said, production has been resumed now. That's what I want to tell you about the impact of the coronavirus on our production network. But at the same time, we think it's important to tell you as we planned what the development of business in the Volkswagen Group was like in the past year and to give you an overview of the current situation.
2019 was a very successful year for the Volkswagen Group. In 2019, we turned in a strong operating performance and laid some vital groundwork. The global automotive market contracted by 4% which was the first time since economic crisis in 2010, and it shrank to less than 80,000,000 units. Volkswagen Group, however, was able to substantially increase its sales revenue and increase its market share. Volkswagen generated an unprecedented level of earnings and Volkswagen has never invested as much in the future as it is doing now.
All 670,000 employees of our company can be proud of what we have achieved. So thank you very much for their great commitment and the exceptional efforts and dedication they have shown for our company. The 7.1% increase in sales revenue was stronger than the deliveries increase 1.3%. We sold better equipped, more profitable cars at higher prices. And as a result, we strongly improved the quality of our business.
Operating profit was €19,300,000,000 prior to special items. The operating return on sales was 7.6%, which was slightly above our target quarter. The net cash flow was €10,800,000,000 which was substantially higher than it was in 2018. So as a result, we have sufficient liquidity and necessary substance to push forward in accomplishing our ambitious plans for the future. Ladies and gentlemen, most of our brands, regions and business units in 2019 achieved progress in their operating performance, sometimes substantial progress.
In absolute terms, the Volkswagen Passenger Cars brand improved the most despite the huge investments necessary for the future mainly on our electrification initiative and the golf model change. Bentley for the first time now after 2 years of losses, was back in the black, a streamlined efficiency program, higher sales as a result of the new Continental GT helped it achieve the turnaround. And financial services too also made a significant contribution to boosting profits both in terms of financing and leasing agreements and in service and insurance we were able to make progress. Scania further improved profit and return and the new generation of heavy duty trucks got off to a successful start and as a result it's helping Scania solidify its reputation as the most innovative allows these new trucks to reduce CO2 emissions by 6% to 7%. And the new powertrain is now also being going to be used by MAN in its vehicles.
The new MAN TGX celebrated its global debut just a few weeks ago. That was the first major step in leveraging synergies between the 2 truck brands. Powertrain accounts for more than 1 third of costs and one off expenses in the truck business. In 2019, Trayton took a crucial step toward its future with its IPO, a key aspect in the unswerving efforts of Andreas Renschler and his team in their strategy to turn it into a global champion. The next step was when Tretan made a takeover bid for the U.
S. Manufacturer Navistar. The U. S. Is the world's most profitable market for heavy trucks.
Skoda not only delivered and improved profit, but also assumed further group tasks, for instance, overall responsibility in India and the future Skoda will produce and market new MQB models tailored to that specific market from its own brand and from the Volkswagen brand. Siatt was able to advance into higher price segments and attract new customer groups with its sporty sub brand Cupra and new models like the Turocco. Porsche too further boosted profits and again posted the highest return at over 16%. With a new Taycan, Porsche demonstrates the huge performance potential in electrification. It goes from 0 to 100 kilometers an hour in 2.8 seconds.
And the vehicle is thus making a big splash with customers more than 15,000 customers have already signed a purchase contract. Audi has held its own well in a particularly challenging situation. The new Audi E Tron was ruled out successfully. Audi has agreed and launched Audi. Zukunft, an efficiency program that will significantly boost its competitiveness.
We will complete the new lineup on the Audi Board of Management under the leadership of Markus Dussmann in the coming months. I would now like to take this opportunity to again thank Ram Schott for his commitment and efforts in turbulent times. The Audi Dazukomft program is one of his great accomplishments. He steered Audi in a professional and commanding fashion before handing over to Markus Dussmann. Ladies and gentlemen, in all regions, we are working intensively to revamp and revise our model range.
We can see the success of this in South America with the new models based on our MQB platform. Models such as the Polo, the compact Sedan Virtus and the T Cross are winning back market share there. In the autumn and South America, following its comprehensive restructuring program and high upfront expenditures, Volkswagen was back in the black again. Further emotional models based on MQB such as the Nevus are to follow in 2020 2021 and will generate additional growth. We grew sales revenues in North America by 15% and Scott Keogh and his team aim to breakeven this year.
In particular, the Volkswagen Atlas and the Volkswagen Tiguan, all space meet the tastes of our American customers. Half of our U. S. Customers at the Volkswagen brand are already opting for an SUV. 2 more SUVs will follow in 2020 2021, including the Atlas Cross Sport.
Preparations for the ID4, our first all electric SUV are in full swing. One of the plants it will be made at starting in 2022 is Chattanooga in the U. S. In addition, a battery production facility is also due to be located there. Last year, the Electrify America fast charging network made significant progress.
It now has a total of more than 400 charging stations, meaning we're already number 2 behind Tesla and are therefore well prepared for our electrification initiative in the U. S. Like in India, Skoda has assumed overall responsibility for the Russia region. We've been profitable since 2018 in Russia, which Experian shows is a volatile market. Both VW and Skoda are gaining market share there.
2 new entry level models and further SUVs from the 2 brands are in the pipeline. The Chinese market contracted for the first time in 20 years by 6.5%. Volkswagen Group grew deliveries by 0 point 6%, thus increasing its market share by 1.4 percentage points to 20%. The highest
growth in
market share in the entire group. Our Chinese organization led by Stefan Bullenstein and our joint venture partners are also to be congratulated on turning in a performance only slightly below the previous year's levels. And I'm particularly pleased about the launch of our new young Jetta brand in China the Jetta models which have been optimized for Chinese customers were competing in the most fiercely contested price segment for local Chinese manufacturers. The first ever car for 4 out of 5 customers is in this segment. We were able to become competitive, thanks to intensive work to cut costs, lower complexity and to come up with new sales concepts.
And in short, the launch was perfect. Ladies and gentlemen, strong brands, outstanding products and powerful global sales organization are the bedrock of our business. The success that we saw once again in 2019 depends to a crucial extent on the attractiveness and quality of our product portfolio. We intend to stick to that strategy with our enhanced 2nd generation MQB platform. The new product range will be inaugurated by the Mark VIII Golf.
New Golf has won over the international and German auto press and ushers in the next round for our MQB. It boasts far lower emissions, sets the benchmark for fuel economy and is far safer and much more digital. It is quite impressive with its raft of new sometimes much improved powertrains. The latest diesel engines, new spark ignition engines with different power outputs, CNG model, mild hybridization to plug in hybrid models and a new GTI with 3 different power output levels. And in 2020, the important sister models of the Golf will follow the new Seat Leon and the Cupra Leon, the 4th generation of the Skoda Octavia as a sedan or saloon and as a station wagon or estate.
And in the premium league, the new Audi A3 initially as a Sportback and later as a sedan. Key vehicles for each brand, highly attractive and well differentiated. Audi is working to reinvigorate its brand promise, Forsprundor Technik. Successful models in 2019 were in particular in Q2 and Q3 compact SUVs, the Audi Q8 and the RS6, the most powerful variant of the A6. One Audi model of great importance for the entire group is the E Tron.
The Audi E Tron proves that we have e models that suit customers' taste in the premium segment. Since the end of 2018, we've sold some 32,000 of them. In Germany and Norway, which are currently the largest markets for e vehicles, the e tron was already the best selling electric car in the premium segment ahead of Tesla at the beginning of 2020. And Porsche has launched the sportiest e car on the market, new Porsche Taycan. The future of the car, ladies and gentlemen, is electric.
We're introducing e mobility starting from the premium segment. That's the most economical path. And this year, we will advance into the volume segment with the ID. 3 and the ID. 4 based for the first time on our MEB and further models from the Skoda, Ziet and Volkswagen brands.
As a result, we are taking a major stride toward 0 emission mobility for all. Ladies and gentlemen, we are preparing for the challenges in the industry with our together 2025 plus strategy and profit improvement programs at our brands. In 2019, we laid many important foundations. The Volkswagen Group Components division has been an independent business unit since January 2019, with sales revenues of some €35,000,000,000 and some 75,000 employees, the Volkswagen Components division is one of the world's largest component suppliers. It is a division undergoing transformation.
In other areas, the group's radical change, greater transformation from the combustion engine to electric drive is taking place here in particular. As a result, key future tasks are now based at large German component production sites. Salzgitter now makes electric motor components and battery cells. The components division produces battery systems in Brunswick. Kassel supplies the entire electric drive to our vehicle production plants.
The components division of group will also be developing battery cells itself in the future in cooperation with the Swedish company, Northvolt, and this ensures that we can set the pace of technological development ourselves. The Group Components division is also tapping into new fields of business such as producing and selling mobile charging stations and buffer storage systems. It also takes care of repurposing the battery after it has been used in the car and ultimately the entire lifecycle of valuable battery raw materials. Recycling, of course, is also part of our end to end responsibility for the battery. We do not want to give away control of the battery and raw materials over its entire lifecycle.
A pilot recycling plant will be created at the components division location this year in Salzqueta. In addition, the components division is working unswervingly to optimize its product portfolio by dispensing with uncompetitive products. Volkswagen Commercial Vehicles has taken a major strategic step by establishing its cooperation with Ford, the successor to the AMROQ, will be one of the first fruits of this collaboration. Furthermore, we've made the decision to integrate the center of excellence for autonomous driving led by Alexander Hitzinger with light commercial vehicles. Autonomous and partially autonomous mobility solutions for transporting people and goods will be created on the basis of the ID Buzz.
The stake we plan to take in Argo AI, a transaction we expect to close in the first half of twenty twenty, will ensure we can leverage synergies in this very resource intensive field of development in the race for the 1st autonomous vehicle fleets. Ladies and gentlemen, because we aim to increase the entire group's authority, agility and flexibility, we intend to simplify structures and complexity at many places throughout the company, and we are doing this so that we can focus fully on the current process of transformation in the automotive industry and in commercial vehicles. We are uncompromising in our goal to seek new owners for parts of the company that are not among our core competencies. That makes sense for Volkswagen and it's better for the strategic for the development of these units and at end of the day also for the security and viability of the jobs there in the future. And that's why we intend to sell our majority stake in RENK.
We expect the transaction to be closed in the second half of twenty twenty. And we continue to look for a meaningful industrial solution for MAN Energy Solutions too. We also made decisions to improve our governance and reduce administration costs in 2019. Ladies and gentlemen, in taking stock of 2019, we should also include how we continue to deal with the aftermath of the diesel crisis. We were able to reach settlements in the proceedings in Canada, Chile and Australia among other countries and in Germany too.
We also recently were able to reach a settlement with the German Federation of Consumer Organizations as part of the model declaratory action it filed and also thus reduce the number of individual lawsuits for the German courts to handle. Furthermore, we were able to terminate the administrative fine proceedings against Porsche AG conducted by the Stuttgart Prosecutor's Office by accepting administrative fine orders. More than 99% of the diesel vehicles with type EA189 engines in Germany have already undergone the relevant technical upgrades. We've upgraded more than 7,500,000 vehicles worldwide. In addition, Volkswagen has taken undertaken to offer voluntary software updates for another some 1,500,000 diesel vehicles in Germany so as to reduce NOx emissions by an average of 20% to 30%.
It will soon be 3 years since the U. S. Monitor Larry Thompson and his team began helping us to address the repercussions of the diesel crisis and that team now numbers almost 200 members. And thanks to their work, we've entrenched truly far reaching changes in our structures and processes. They extend from the anonymous whistleblower system and strengthening of independent auditing to reclaiming compensation from management in the case of compliance violations.
Thanks to the monitorship, Volkswagen has become a better, more transparent and more responsible company. And in the future, it will not slacken its efforts to drive the improvements it has initiated in relation to its processes, culture and responsibility. Ladies and gentlemen, 2019 was a successful year for Volkswagen, a year in which we set the course in many important strategic areas. Thank you.
Thank you, Mr. Diggs, for your introduction and explanations. Now I'd like to ask our CFO, Frank Witter, to present the business trends 2019 in some detail. He will explain what has happened and give you an outlook on the business trends for 2020 and as far as that is possible. Mr.
Witter? Good morning, ladies and gentlemen. I'm very pleased to see you back at our annual media conference and welcome you. As you know, we've announced the key data for the 2019 annual financial statements at the end of February. Today, we've also now published the annual report.
I will now explain our business figures in detail. Volkswagen during this fiscal 2019 has closed with sound figures and stayed the course despite an environment which was a challenging one. Let me just mention the trade policy tensions, the intense competition which we felt in all our core markets. The cooling of the Chinese market which is our 2nd home market now that has kept us on our toes and the fundamental technological change within the entire sector and industry. And so it is a good thing that the group sales revenue at €252,600,000,000 were up 7.1 over the previous year and even above our expectations.
Looking at the key drivers of this development of sales revenues, on the hard side, the positive effects here we have for the entire year coming in the mix, the type mix, which made a positive contribution. We also sold higher unit volumes and there was a very strong business growth in the Financial Services division. Negative impacts were the exchange rates, particularly in Latin America and Turkey, positive effects from the U. S. Dollar could not overcompensate these negative detrimental effects.
We had a 13% improvement of the result to JPY 19,300,000,000 higher than the pre year financial 2018. Before special items, the operating return on sales is 7.6%, which is even above the 6.5% to 7.5% corridor, which we'd forecast despite the difficult environment. It has been and will remain be our Serjei 2025 plus target to achieve all our milestones. When it comes to operating profit as a development from 2018 to 2019, you see on the left hand side the Pensacar division. Here, particularly the volume mix and prices area was very positive at €3,700,000 and this was a main driver across the year.
At the end of the day, also we made headway with product costs saving EUR 0.6 billion and we had some headwinds. The entire year was volatile. When it came to exchange rates and derivatives valuation, at the end of the year, we had EUR 200,000,000 influences and higher fixed costs, which we expected at EUR 2,800,000,000. This is due to depreciation on high investments or amortization of the high levels of investments into technology and plants from the previous years and also in the income statement, we had a higher charge stemming from development costs amounting to €1,100,000,000 This is exactly about the electrification, CO2 measures and digitization, interconnectedness of the vehicle and of the group. These investments come in here.
Commercial vehicles were very pleasurable development here at 500,000,000 yen above the previous year. And I'll provide further detail when explaining the brands later. Operating profit at Power Engineering division, very difficult environment, operating profit on a par with the previous year. And financial services, not just positive when it came to sales, but EUR 400,000,000 above the previous year. Despite the persistency challenging environment, we were able to improve the operating profit of the group before special items to EUR 19,300,000,000 fully meeting our expectations.
Unfortunately, in fiscal 2019, again, we had negative special items from the diesel issue. Although they dropped by €800,000,000 they were still at €2,300,000,000 in our books having to be recognized mainly from legal risks and legal defense costs and also the administrative fine of €500,000,000 of the Stuttgart Prosecutor against Porsche and the model declaratory claim cost us €800,000,000 as well. Let's now move on to an overview on the individual brands. You'll find more detail in the publication of my colleagues in the brands. As my moment.
This is towards our margin of 6.3%, 4.3% at the moment. This is 0.5% improvement over financial 2018. Of course, mix improvements come in as well and price improvements, particularly where it was necessary because of the exchange rates. Unfortunately, unit sales dropped by 1%, slight decline, but ramp up costs for the important future projects, for instance, the Golf
8
and the ID3 and also the exchange rates had negative impacts. Volkswagen Passenger Cars, JPY 1,900,000,000 special items on a par with the previous year 2018 had to be factored in. Audi knew that the first half of the year would be the stiffest ramp. They had JPY 4,500,000,000 4.2 percent lower than the figure of the prior year operating profit before special items improvements in the mix and product costs had a positive effect as did the Audi transformation plan and the consequent Audi strategy. These are important factors when countering the headwind.
Netherland less higher upfront expenditures for products and technologies had to be factored in. And as with VW Passenger Cars, the exchange rate negative impacts had to be digested. The operating return on sales, slight improvement to 8.1% after 7.9% the previous year before special items. Skoda brand improved its operating profit very strong, JPY 1,400,000,000 in 2018 to JPY 1,700,000,000, The Ryzen unit sales to over 105,000 vehicles had a positive impact as were positive mix effect and pricing measures helped cost increases for upfront expenditure for new products had a negative impact. The operating return on sales at 8.4% is a tremendous achievement, again 0.4% better than in 2018.
Sead, in terms of the leapfrogging ahead is our world champion at 75% improvement in operating profit at €445,000,000 volume and mix effects had a favorable impact. And the reason were the models of Rona, Etega and Turanco being very popular SUVs with the customers and with the Mi electric, we've got the fast stand production electric model at the SEAC brand. The operating return on sales was improved by 1.4% over 2018 to 3.9%. Very interesting to see the change that has been worked towards. You can see how difficult 2018 was.
It's a positive thing to say that we're in the black figures again. We have EUR 353,000,000 the previous year was EUR 65,000,000 plus. We had minus EUR 288,000,000 We are now selling more units and cost savings that the team has not only planned to do, but was able to deliver on mix and exchange rate effects were positive contributions as well. The operating return on sales rose to 3.1 percent at least it's in the black. Again, Porsche Automotive, the Q1 was going to be difficult because of availability issues, but then the year ran extremely well for our colleagues in Stuttgart.
Operating profit could be increased to SEK 4,200,000,000 operating return on Invest at 16.2%, slightly lower than the previous year, but we're quite pleased with that. Volume and mix were the main drivers, optimized product costs and achievement of the Stuttgart team. Exchange rate effects and cost increases, particularly for upfront expenditure, had a negative impact. The diesel issue negative special items were JPY 500,000,000. In the previous year, we recorded none.
On to Commercial Vehicles, a very strong first half of the year. The second half was marred by availability issues because in commercial vehicles, WLTP hit the manufacturer half a year later than in passenger cars, euros 780,000,000 operating profit after a strong 2018 at EUR 7.80, we now have EUR 510,000,000. However, the improved product costs could not offset the higher development costs and WLT is something I mentioned already, but we still have an operating profit of 4.4%. Scania, the generation we've moved on to the new truck and the result is 24.8 percent, an increase to EUR 1,500,000,000 higher vehicle unit sales and also a very important and strong genuine parts and services business have contributed as did improved mix and exchange rate effects which were tailwinds of 10.8%. That's a strong margin after 9.3% in the previous financial year 2018.
MAN Commercial Vehicles also positive. We've made headway at €402,000,000 operating profit after R332,000,000 in 2018. Financial year higher unit sales have helped us and the recovery of the business in Brazil after the long crisis have recovered. And despite of this, we had needed to factor in that the previous year had a burden from the restructuring in India. So we have 3.2 percent operating return on sales.
That's not entirely satisfactory and we'll have to discuss further measures with our partner on how to set business at MAN to an even more robust footing. Volkswagen Group China, who I believe, have a decent already mentioned, can be proud in this environment to have sold 4.2 1,000,000 cars in this area. That's another rise of 0.6%. That is an achievement and it has become our 2nd term market. The most significant individual market in the group with 40% of unit deliveries of our vehicles there.
And in this difficult environment, the quality of our brands, particularly Porsche, Audi and Volkswagen Passenger Cars has generated returns and our market share has improved again to 19.8% after achieving 18.4% in financial 2018. But of course operating profit attributable to our joint ventures at €4,400,000,000 which is marginally below the already record year of 2018. It's a tremendous achievement and the operating profit of our joint ventures are obviously not part of the bottom line of the group, the operating profit, but they have a profit impact at equity in the financial result. Financial Services are very important part and parcel of our group earnings, strong brand and it makes an operating profit contribution. We are very pleased with the 13.3 percent with a record figure of EUR 3,000,000,000 achieved mainly driven by the strong business growth here, but also cost cutting programs, which are gaining traction.
Now on to the financial results, to the group's financial results. At in sum, JPY 1,700,000,000, 300,000,000 short of the last financial year, the important factors contributing to this. The equity result at EUR 3,300,000,000 is exactly on a par with the previous year level, which was healthy. The interest result deteriorated by EUR 1,000,000,000 due to interest expenses, which rose due to 3 drivers: a higher refinancing volume needed the accrual of provisions, which are interest geared and from January, we have the IFRS 16 effect, which is the leasing interest, which has to be factored into the financial result. The other financial result is volatile.
There are valuation effects, which need to be factored in and the securities and fund result is very positive, contributing good figures. Let me summarize the highlights of the annual financial statements. The operating profit of financial 2019 at 17,000,000,000 after even after the already mentioned special items is at a very high level. As we explained, the financial results totals EUR 1,400,000,000. Pretax profit at EUR 18,400,000,000 was 2 point was higher than the EUR 2,700,000,000 of the previous year earnings before tax.
The tax rate was EUR 23.6 compared to 22.3 percent in the previous year. Earnings after tax increased to roundabout14,000,000,000 euros after the €12,200,000,000 in financial 2018. If you need any details or figures on those figures, let me refer you to our Investor Relations Internet website. You know from the previous years that with the return on investment, we've created a value based management concept. It is the operating result after tax in relation to average invested capital.
You know that the Chinese joint venture are factored in on a prorated basis. The ROI in 29 rows, first of all, we had invested capital, which increased significantly. We had the IFRS 16 effect, contributing around about EUR 5,500,000,000 and additions from CapEx and capitalized development costs had to be factored in higher invested capital. The higher operating profit overcompensated that, so to speak, so that the ROI after 11.2%, 11% in 2018 was improved in financial 2019 to 11.2%, which puts us on a course to achieve our targets of our strategy 2025 plus. Now on to the financial situation of the Automotive division internally and externally both.
1 of the, if not most important key indicator is net cash flow, which are sales revenue minus the payouts and tie up of capital due to increasing investments and inventories. At EUR 10,800,000,000 net cash flow as forecast was considerably higher than the previous year. The higher earnings, of course, lower cash outflows from the diesel issue and the low rise of inventories have created the biggest positive impacts. Looking at net cash flow, usually adjusted for the diesel payments and M and A activities, mergers and acquisition, the net cash flow of the Automotive division was at a proud 13.5 €1,000,000,000 Net liquidity, this is hardly a surprise of the Automotive division, is materially affected by the net cash flow. In addition to this, there were further factors which should be mentioned at this juncture.
First of all, the inflow of cash from the IPO, the initial public offering of Triton created a positive contribution of €1,400,000,000 The dividend payment of €2,400,000,000 to the shareholders of Volkswagen AG rose by €500,000,000 year on year over the previous financial year. That's a negative effect. And also, settlement payments and the purchase of MAN shares offered for sale amounting to EUR 1,100,000,000 had a negative impact. And of course, this is also added. It's the effect from IFRS 16 provided EUR 5,400,000,000 in negative impact on the recognition of net liquidity.
This is not an effect with a bottom line impact. It's only a recognition thing and an accounting thing. At €21,300,000,000 net liquidity from the automotive division remains very sound and is again €1,900,000,000 above the level recorded at the beginning of that year. Capital expenditure was higher as we knew that in 2019, a lot of upfront expenditure in CapEx in new technologies was needed, JPY 14,000,000,000 or towed, JPY 800,000,000 up on the previous year, a lot of investment into securing the future production sites and the new models such as the Golf Atlas, Audi A3, the Audi A3 and 4, Audi E Tron Q3, A6, A7, Porsche Taycan, the Pentate Continental series are just some examples without listing a complete major investments site. It just shows that we're investing in our future.
The CapEx ratio at 6.6% was at on par with the previous year and the lower end of the corridor projected of 6.5% to 7%, which we planned for. Primary search and development costs came 700,000,000 in over the previous financial year 2018 at €14,300,000,000 They were incurred mainly as a result of new models being developed, electrification of our vehicle portfolio and an efficient range of engines, also IC engines and digitalization interconnectedness that of course required major expenditure. Our R and D ratio at 6.7% though was still below the previous year and within the forecast range of 6.3% to 7% of course. Ladies and gentlemen, the profit contribution of Volkswagen Neji shareholders to Volkswagen Neji shareholders is at JPY 13.3 €1,000,000,000 up from the €11,800,000,000 in 2018. Basic earnings per share totaled EUR 26.6 per ordinary share and EUR 26.66 per preference share.
The Board of Management and the Supervisory Board are delighted to propose to the shareholders a dividend of €6.50 per ordinary share and of €6.56 per preferred share. This is, ladies and gentlemen, a increase of 35% of the dividend and the payout ratio thus rises from 20.4 to 24.5 percent for financial 2019. I may stress that our strategic goal remains a payout ratio of at least 30%. The Annual General Meeting of Volkswagen Aksing Gesellschaft is scheduled to take place on May 7, 2020 in the City Cube in Berlin. We are all aware of the complicated situation and we are intensively speaking to everyone involved and also the authorities and will make preparations and we will keep analyzing the situation.
The figures of the year, financial 2019, prove that we have worked hard for a position from which we successfully shaped the transformation of Volkswagen Group amid this continuing challenging environment. The years 2020 2021 will be decisive for us and are linked to several challenges such as the adherence of the CO2 limits in Europe, for instance. Moreover, there are further challenges such as the volatile commodities and products markets, for instance, in the 1st 2 months of this year, but also geopolitical tensions, which are persistent, although at the moment, people are focusing on different news items. We need to keep track of these geopolitical tensions as well. Ladies and gentlemen, of course, all over the headlines is the spread of coronavirus.
The impact and the duration and severity of this pandemic is uncertain and it is virtually impossible to give a reliable forecast of our financial year. We're in task force mode and we are leveraging all measures to keep our employees and their families safe and to protect them and also to stabilize our business. I'll be happy to take your questions after the presentations. Back to Mark Langendorff.
Thank you, Mr. Vitter for your presentation. Now before we begin with Q and A, the operator will explain the process to you on the telephone. I would like to take this opportunity to give the floor to Mr. Diets to address the main challenges for this fiscal year.
Ladies and gentlemen, with regard to the new CO2 targets in the European Union, 2020 is a watershed year. As of now, the stringent new regulatory requirements apply. By far, the most efficient way to meet fleet targets is through profitable electric vehicles and in the premium segment in some markets also in with plug in hybrids. With our product portfolio, we are well positioned to tackle 2020 2021. All in all, we will have 15 electric models and 18 new plug in hybrids in the marketplace.
The electrification of our fleet is thus now underway. Sales of these models has already gathered significant momentum in the past few weeks. The order backlog for some of these vehicles already extends beyond the middle of the year. Our efforts are focused on the supply of batteries and our demanding new product launches. In order to secure our return targets in spite of these endeavors and uncertainties, we will also use these 2 crucial years to leverage synergies in the group far better effect in terms of plant capacities, common parts concepts, brand management and in reducing redundancies.
At the same time, we are tackling the current greatest challenge. The car is becoming a complex Internet device, generating data and using data. Yes, it is true. The number of mobility offerings as an alternative to the private car is growing in particular in urban areas. But will they be able to replace the car in the foreseeable future?
Will car sharing providers and their platforms elbow their way between us and our customers? They will try to do that and keep on honing their business models. But we are convinced that the car has a great future. There is no other means of transportation that meets such a wide range of different mobility needs in such a reliable, flexible and convenient way. It is a promise of individual freedom for millions of people.
And in addition to that, the car is changing at an extremely fast pace. It is becoming electric and thus producing 0 emissions and becoming sustainable. Moreover, the amount of electricity that the entire fleet needs represents a constant and reliable demand that will help drive the energy transition and the car is becoming highly connected, always online and thus far safer and even more convenient and comfortable. To ensure that Volkswagen continues to play a leading part in this radical transformation, we must create the condition so that the automobile can be run as an Internet device with constant software updates and a growing number of new services. Our fleet will become both a generator and user of huge quantities of data, helping ensure that vehicles keep on learning to drive better and better to operate successfully in this area.
2, Volkswagen needs to substantially strengthen its software's expertise. To build that up, we are making strategic acquisitions, entering into strategic partnerships and also clustering our expertise within the group. We've already taken some initial steps by taking over WirelessCar and Iconium by cooperating with Microsoft to establish a cloud based platform and with our car software org, which pools our digital expertise throughout the group. Since the beginning of January, the 1st January, the organization has been up and running under the leadership of Christian Singer. It brings together some 3,000 IT experts from our group's holdings and subsidiaries.
And that number is expected to rise to more than 10,000 digital experts by 2025. Implementing this plan is a top priority. Ladies and gentlemen, to recap, in 2019, Volkswagen laid the vital groundwork for all key changes. 2020 is a very difficult year. The corona pandemic means we're facing unknown operational and financial challenges.
And at the same time, there are concerns about sustained economic impacts. In our most important market, China, the situation though has now stabilized with a few exceptions. Our sites there have now resumed production. Deliveries are growing once again in March and are slowly beginning to normalize. The crisis in Europe and worldwide has yet to come.
We can fall back on what we've learned in China in terms of hygiene and organizational measures. We are temporarily reducing capacities and securing logistics chains. Our focus is on protecting our employees and their loved ones. We are doing our utmost in close cooperation with the authorities to master the crisis. We will succeed in overcoming the corona crisis in Europe and the rest of the world by pulling our strengths, cooperating closely and keeping high the morale in our group.
Thank you.
I will now open the floor for questions. The operator will have told you to press 1 to put a question to one of our Board members. We've expanded this round here for reasons of this unusual situation. Mr. Zama, responsible for Guillaume and Component Manufacturing, will join us on stage.
And Gunnar Kilian is here. He's head of the task force in addition to his other responsibilities, the task force on the coronavirus. And I believe probably most questions will pertain to these topics and the other group board members are also joining us via telco. One good tradition will be continued. However, the first question will be asked by Henning Kuo from Automobilwohr, the carmaker.
Ladies and gentlemen of the VW Group Board, thank you for not organizing this as a FaceTime meeting. Corona concerns us all. VW as the world market leader is taking precautions rightfully. My question is Mercedes, Crona will generate billions of burdens for the mobility industries. Do you consider to stop paying the potential CO2 fines to the EU.
Mr. Blum, if you're there and Mr. Brunstetter, when ramping up ID production every week and every day counts also in R and D, could corona cause temporary shutdowns? And will VW hold on to its statements that you will launch this BEV in summer before September. When you were speaking, Mr.
Gies, I was joining the telco when you were speaking. Will the AGM be a FaceTime event, a physical event? When will you decide whether to organize the AGM on the Internet exclusively? And the last question goes to Mr. Kilian.
Do you expect that after the restart of the production of VW plants, there'll be bottlenecks in part supplies because the suppliers can't provide? And will there be short work in the VW plants? And can you exclude that VW will file for state subsidy to help its employees? Mr. Diest, if you would care to start.
Well, I'll start with the questions directed to me. Yes, I've heard that in this industry, there is this discussion. We are prepared for that. And we are getting close to achieving our fleet targets. The electric vehicles are selling well.
The order book is good for both BEVs and PHEVs. Of course, it's very difficult to foresee and to forecast how the mix will change in such a difficult year such as 2020 and the way customers decide. But we do not expect that we will have to diverge from our fleet targets. Temporary shutdowns, of course, there will be some. However, we'll focus on the outstanding R and D development work for the ID.
This is fairly independent of what happens near the production plants. And so we continue to believe in the launch of the ID3 in summer. On the AGM, Mr. Litter? Yes, I'll be happy to take that question, says Mr.
Vitter. Good morning, Mr. Voorhees. We're planning the AGM for the 7th May. The stock corporation law obligates us to have a FaceTime meeting on May 7.
The preference, of course, is online to go online. We are considering the situation, and we are considering the information need to be satisfied for as many people as possible using digital channels. However, we must organize a FaceTime meeting, a physical meeting, but we can do it on May 7. We cannot foretell yet because developments are underway. Then parts supply, the last question and possible state help for this.
Well, just very quickly on part supply.
At the
moment, from the experience of China, we've been able to keep our parts supply secure. We are secured this week. We are working from day to day with the supply chain and with the increasing difficulties and problems of the logistics transportation in Europe, it becomes more difficult. So we are expecting interruptions in the supply chain next week. I'd like to build on that Mr.
Crook, if I may, both the distribution situation and the supply of our plants with plants, as Doctor. Summer has just explained, in close scrutiny and possibly we will apply for state funds. The next question is from Jan Schwartz from Reuters. Thank you very much. A lot of questions have been asked, answers given.
Your forecast is something I'd like to hear whether you're officially not standing by it because it still is in the documentation. But what with the effect of corona, this cannot be kept up. So the production interruptions, considering these, you said most plants in Europe and Germany of VW, does that concern the other brands as well? Are there exceptions to this? I'd like to know.
What about the Turkey plant that surely is on the back burner. I'd like to get an assessment here. And last point, with Energy Solutions, you said you're looking for an industrial solution. Exceeding this, are there divisions or areas which you are focusing on now more to improve your financial cloud?
Well, perhaps I can begin with the outlook for 2020. Yes, Mr. Fraatz, that's correct. What you said currently maybe reliable forecast isn't possible because above all, no one can estimate how severe and how long this how severe it will be and how long the corona situation will last. And as a result, it's quite obvious that right now we're in the task force mode to secure our facilities, taking care of employees, stabilizing business processes and liquidity is important too.
But another point is what Doctor. Diess mentioned, the situation in China there, there are indications that situation is improving. We don't know how long that will last, but it's important that all of these measures that are being taken, some of them are quite drastic, must have the necessary effect and then that we can look for some positive signals whenever they may be. And therefore, for 2020, well, we can say we don't want to completely write the year off, even though right now it's not at all foreseeable as to whether the forecast that we made at the end of February can be achieved in particular with regard to the assumptions regarding corona. We want to get through the year as best as possible.
Our priority is of course, our employees, their loved ones and families, liquidity and business process. Yes. The second question was the Turkey plant says, Mr. Dies, the need for additional European capacities still does exist. The Passat has been taken out of Emden.
And with regard to Turkey, we have another fallback option in Eastern Europe. As a result of the shift of Euro 7 requirements to a European level, we have a little more leeway with this decision. But in the next few months, we will make a decision on that new site. And then there was a question about additional corrections with regard to our portfolio. In principle, I can say that the strategic work in the group is continuing even in this critical environment.
Of course, we're going to be reassessing the time scale and then liquidity and cash position in the group will be taken into account too. And there was a question about the individual plants and brands. Well, Herberty said when he began that basically since the second January, let me give this general explanation. We've been working in the task force and we are of course closely working together with our colleagues in China on corona and measures agreed on for that. And now how we proceed from here with our different plans and in the brands is something that's being handled by the group task force.
And as Herbert D. Said, during the course of the day, each of the brands will provide it be providing information on how step by step they might be stopping production and planning to do so. Okay. Thank you. And the next question next group of question, Christoph Hallberg, Bloomberg.
Respond to and take advantage of. And we still believe that capital markets will still be open even though the credit spreads currently have run out. But we believe that we have the necessary measures and we're going to focus massively on ensuring that the outflow of liquidity is reduced to a minimum. But of course, we do have fixed costs that are substantial as well that we've got to carry. Now with regard to M and E activities, I can say that, of course, a situation like this makes means we have to have a cool look at keep a cool head in looking at the situations.
Whenever we want to change our portfolio, of course, we never do it at any cost. And it's important to ensure that assets that we do believe are valuable shouldn't just be shed at any price. So we're going to focus on ensuring that we get good prices. Currently, of course, the market is in a special situation, which means that reevaluation, reprioritization is definitely necessary. Thank you.
Next question, first, Jorg Ezehn, NDR.
Thank you very much for the opportunity to put questions. I am still a little surprised at how quickly you want to shut down several European plants. Of course, the question arises on the possible financial risk entailed. The federal government has made it clear that they will put their weight in, in favor of the companies and OEMs, both the small and the large ones. My question is to Mr.
Diess. Do you feel that the measures of the federal government are enough to offset the losses? Or would European health measures be necessary and to have to be more substantial to be adequate to meet the crisis. Which plants will be shut down is my second question. When will the employees informed be informed?
Will plants be closed today or will that begin on Friday only? Mr. Di's answers. First, I'm pleased to learn that both at a European level and from the German government, we have heard quite clear commitments that they were ready to assist companies which were in trouble because of the corona crisis, although they have good business cases which really work, that they would be assisting them. Please bear with us that we do not have a finished plan on the table for this sort of thing.
The priority is to turn off the shutdown the factories to slow the spread of the risers at the right point in time, not too early and not too late either. And we're in this process in Europe, that's different, of course, from region to region. In Italy, as you may imagine, our plants have been closed already for days weeks sometimes. In Spain, at the beginning of the week, we shut down our main production facilities, not everything, but the main facilities. And we're currently in discussions on how we will roll this out to the group this week, next few days, but in a well controlled manner.
Also, bearing in mind the logistics chains and the inventories, the plants will be slowly shut down. Also in conjunction with the works counselors and the different plants and sites. We have a huge number of plants and sites. These shutdowns beginning next week and then for the next 2 to 3 weeks in Europe will come about. And the overseas factories, we don't see the critical situation there yet for any of these.
And so we feel that this will be a systematic and well considered procedure. First, of course, in Germany, there is regulation, there is shorter working hours compensation and we are shutting down the plants because of the contracting demand and we will work shorter hours and we will be able to bridge this with this compensation for the short time work in Germany. And for Europe, this would lead too far if we were to discuss all the rules and regulations governing these situations in every country. The financial risk from my point of view cannot be assessed yet. That will depend on the duration of the crisis of course and of what will happen to the economy after the crisis.
Our biggest exposure and this was mentioned time and again is China, of course. There we have the largest market share. We are the biggest carmaker by far in China. There we were able in coordination with the companies and the government, we were able to restart the economy. Sales are starting again.
The showrooms are open and customers are buying cars again, which shows us that with a good crisis management and good coordination between politicians
and
companies, corporations, even a dramatic crisis such as corona can be managed. And we are confident that we'll be able to do that in Europe as well. Agila Slavik from Zutteutsche has the next question. Ms. Slavik, are you there?
She is not asking a question. That would be a first. Well, then we'll move on to Mr. Sebastian Schmidt from Die Borzen Seitel. Let us move on to Sebastian Schmidt from Die Borzen's item.
Ms. Slavik is not audible. Maybe we can move on to the next in line. They're working on it. It's a classical situation.
They're trying to play for time, of course. My apologies. It's the first time that we're having a virtual Annual Media Conference. We're not sure what the reason is why we can't hear any of those asking questions. We're waiting for an information on our phone system.
Due to the number of people working from home office, we need dramatically more bandwidth. Of course, we saw this last night when we held conferences. So we'll have to prioritize things because our annual media conference is of course important. Good. So we'll move on.
There's an English question. Please answer in German, although the questions are put in English.
So may I ask a question?
Okay. Yes.
Hello. Can you hear me?
Yes.
Hello.
Yes, we can hear you.
Hello? I can't hear you. Okay. So can you hear
me? Yes.
So I've got 2 questions. So question 1, do you still hope the ongoing decline of demand in Europe will be offset during the year? And or will it take several or more years for it to normalize? And my second one is a kind of follow-up question. So does the current corona development force Volkswagen to delay its electrification target in 20 28 and 5 year investment plan?
To forecast unit sales for the rest of the year is surely very difficult from where we stand today. This will be a function of how quickly we can overcome the crisis, how long it takes and what economic stimulus action is taken. Compared with China, China is coming back and our scenarios assume
a
slight decline 3%, 5% as a middle assumption for this year 2020. For Europe, However, I believe it is too early to make any forecasts and assessments. Nevertheless, I believe that when the crisis can be overcome as quickly as people did in China, then we may expect a recovery in Europe after the crisis and a recovery of the markets as well. I believe we should expect that how long the crisis takes surely is a big unknown here in Europe. For X1 delay, we have no delays.
We stand by our electrification plan and push the ramp up of the MAB cars will take place this year and we will not need to reprioritize our investment into electrification. The next question comes from Philippe Mounier.
Okay. I have two questions. One question is regarding the Volkswagen Group component. Which percent is your sale do you plan to have outside Fallsagon Group? And would you say that you are comparable to Hyundai Mobis?
My second question is about user interface. I understand that user interface are becoming more and more important, including head of display. So my question is, how do you see the future of user interface and head of displays?
Components business, our components business only has very low volumes sold to 3rd party customers. Engine supply contracts and some components, but that is not a major share. That will change with the marketing of our MEB, our electric platform. The components of the MEB MEP toolkit are made in our own production sites as part of our component manufacturing division. In 2023, there will be a serious third party customer business based mainly on the new technologies, however.
And of
course, it's in our interest to generate additional scales through component manufacturing, which we will share with third parties, of course. Mr. Doctor. Zama will probably have a few remarks on this to complement this. The head up displays and the user experience inside the vehicles, of course, constitutes a core competence for us.
We have different user experiences in Porsche, different from Audi, different from Volkswagen. That's a function of the vehicle type. Head up displays play an important role here, particularly with MAB, our electric vehicles. We are getting an augmented reality head up display in the volume segment. Surely, there will be displays and ways of interacting with the vehicle.
We're a big differentiator in the car of the future, particularly when it comes to communication from the car, distraction free to be able to work on emails, for instance, during the phases where the cars will be able to drive more autonomously and a lot of voice control will be done. User experience is a central research element and differentiator for us and we will continue to forge ahead here.
Thank you. We still have some having some problems with the technical transmission, at least one of the lines is having trouble. Ms. Slava was nice enough to send in her questions via text. I'll read them to you.
She has 2 key questions. I hope you can hear the questions or the answers at least, Ms. Slavik. You said the telephone system doesn't love you, but I apologize in any case for the current situation. First question, Ms.
Slavik, how long would Volkswagen be able to hold on in complete shutdown of the European market? And question 2, how is the Board of Management protecting itself to ensure that Volkswagen is going to continue to be able to act even if there is a corona case on the Board of Management. Apart from that, I'd like to call upon journalists to just send me a text with their questions if they have any or they can send me an e mail and then I can read them up here. I'll begin with Ms. Slavik's first question.
The one thing is Europe and the other thing is other markets. So with regard to the question as to how long looks like and what cold out, well, there are so many different assumptions we'd have to make there that we couldn't be serious in giving an answer now, because of course our cash flows depend to a great extent on Europe, but not just on Europe. And Mr. Diess also said that in China in March, there are strong signals that the market is picking up could be something like $800,000 to $1,000,000 Getting back to that, even though in February, the figure was extremely low $250,000 So we've got good net liquidity basis in the automotive division. We have a broad range of funding and refunding measures and options available.
And of course, we're also optimizing our flows, outflows from the company. So as a result, it's very important for us to work in a focused fashion, but not to be too overly concerned. It's important to keep a cool head now and make sure that the measures and we do have a lot of measures should be taken to secure our security, our liquidity. We've got to do this and we have no doubt that these tools will be available to us according to everything we know today. Mr.
Di says, second question, how is the Board of Management dealing with corona in our daily activities? Well, we heard very early from China about what should be done and we're doing that. As you can see, we and the Board of Management are keeping far apart from each other. And a lot of our discussions have been switched over to video conferencing, telephone conferencing. This is working quite well and it's also good practice for all of us.
And then with regard to travel restrictions in the company, I can tell you that, for instance, quarantine times apply to anyone who comes from a crisis area. These things apply to the Board of Management too. In addition to that, the presence in our offices has been substantially reduced. A lot of us have changed over to home office work. And our cafeterias have now been changed over to lunch packets.
And in the weeks to come this will be done in all of our factories too. So we're basically implementing all the things we've learned in China and what our specialists, our company doctors and so on are proposing in order to make sure that the spread of the virus is as slow as possible. And I think so far, we are all still able to work quite well. In terms of travel activities, well, I can see that it's astonishing that we realize that a lot of things, a lot of our work can still be done without having to travel. And of course, our video conferencing activities are helping us take care of our work.
Thank you. Next few questions. One from Edward Taylor from Reuters First. He has three questions actually. First question?
On the industry consolidation, Second question is, could this accelerate or delay plans to win control over the China joint ventures? And that's basically it. So,
Please go ahead and answer the questions. Mr. Diess says, yes, first of all, the virus of course is impacting all companies in the same way, just as severely. But nevertheless, we believe that in China, we are a bit ahead because in China, we've got a market that is recovering perhaps a little bit faster than others in this phase, and they might have a bit of a lead in that. And as a result, we might have a bit of a lead there.
And making a prediction about what impact this will have on a shakeout in the industry, that's difficult. In China, we don't see any major disruption of the relationship with our joint ventures. But nevertheless, we are interested in and would like to continue to expand our position in the joint ventures in China. We've got 3 joint ventures there. And of course, we are considering our investment plans in order to see how we can continue to strengthen our position in China.
But this is completely irregardless of the crisis. Next question, Martin Murphy from the Handelsblad. He'd be interested in how the Board of Management has so far looked at the crisis management of the German government and at the European level, what's their judgment there? 2nd question, further assistance and subsidiaries, are they necessary above and beyond the short time working subsidies? And then third question, the Works Council.
In a letter that was published, the Works Council criticized the fact that the factories are not going to be closed until Friday. What is the opinion of the Board of Management on this? Well, sure, go ahead. Mr. Killian, I would like to begin right away with the last question.
That is stopping our factories as of Friday. Of course, I received and read the letter from the Works Council, but let me state here this. I mentioned previously that since the second January, we are in task forces and are working on task forces around the world to come up with the appropriate measures for the corona situation. And I think at Volkswagen, we have been quite convincing in our reactions. Reduced business travel to the essentials corona cases in the entire group and the entire world so far, only number 25 In Wolfsburg, for instance, we only have 3 cases.
2 of these came 2 of these people came back from a private trip. They weren't even in contact with anybody in the company, in the factory. There's one case we had in the factory that we sent a number of people into quarantine as a result of that. So we've been acting very systematically in order to protect our workers and that's our focus. Then with regards to the programs, production programs at the factories, what we're discussing here in particular with our colleagues in the sales division and in purchasing to see how the market situation and the supply situation at our factories is developing.
Today, we're going to have further meetings and then we will announce via the brand when we are going to be shutting down the factories. We're also doing this with great responsibility for the logistics change out on the road. So we're going to have an orderly process to shut down the factories. And of course, this will be done in close coordination with the works councils. Mr.
Di says crisis management of the government, the governments well In China, everything is very focused. We're used to logistics crisis management, crisis management there. It was very successful in China, in Germany and in Europe, it won't be possible to do it that way. But nevertheless, I do believe that the German government reacted in due time and is doing it systematically and consistently. I hope that people understand that things will be done synchronously everywhere because the risk situation and the progress of the crisis varies and the health systems, medical systems in different countries varies.
So it's an important sub chick crisis management is and was very important for us. And we take into account the fact that logistics flows are given priority. They're staying open. We have a supply network from Upper Italy to Eastern Europe and all around Europe. This is important to ensure supplies to our factories.
This has been successful so far. And as we slow down our production and stop production, that won't be as necessary. And of course, it's very important for us to ensure that logistics flows remain open. We want in particular to ensure that our newly launched battery electric vehicles get the necessary supplies, which is being addressed well addressed. And then financial support, and this is essential in the medium to short to medium term.
And for that, we have discussion platforms with the governments. And at a European level, we can see that in Europe, well, the governments don't want to leave this up to industry alone. So therefore, we're satisfied with crisis management. Mr. Witte says, I'd like to add something, because I talked about liquidity a number of times, it affects us.
But of course, we're also thinking about our many suppliers and our dealers to stick to our industry, but there are many, many different companies, small businesses, artists and so on. And it's very important to realize that European Central Bank must make banks quickly capable of helping when necessary. And I think that the measures that have been initiated and statements from the German government are very strong. They're pointing in the right direction, something that if there's anything needed in addition, we'll all learn about it. As I said, it all depends on how long and how intensive the corona crisis is.
Right. Thank you. And as far as the journalists have sent me emails, only the phone line has broken down. Using Global Meeting, Most can hear us out there and we are audible. Olaf Pois Vandewed has the next question.
He wants to know how the strengthening of parts from component manufacturing, the relationship of the group with its suppliers changes, particularly when it comes to electric parts and electric digital suppliers like Continental and Electric Bosch. Will there be more competition with these suppliers? Question to Doctor. Zama. Doctor.
Zama answers, fundamentally, in Component Manufacturing, we are trying to drive transformation towards electrification and modern technologies. It is not our aim when it comes to electromobility. I'm speaking about batteries and power electronics to make everything ourselves. However, it is our strategy to actively contribute towards the development of technology and also for our company and the transformation when it comes to employees and value chains to be in control of these value chains. So we see opportunities for suppliers to join us on this trajectory in both growth and supplying parts.
The same holds true of digital technologies. Here, the technology is evolving and we are having to move towards doing things ourselves. It's not a part of dividing value adding shares. It's developing future data handling functionalities. And here, we are in the role as the central architect, the builder.
It is not so much the traditional digital technology, but with a new digital technology and interconnectedness, new business fields open up and the technology companies of all states have the opportunity of evolving with us. Thank you. The next question is from Joe Miller from the Financial Times. He wants to know when it comes to CO2 targets in this company and this next year whether there are talks underway on industry wide fleet targets with Brussels. And what is our estimate will happen when the European Automotive market will get impacted by this?
Can we will we change our targets? Mr. Dienza answers. Well, most of all, it's a question of the associations. The VDA, the German Motor Industry Association will speak here.
And then for Asia and worldwide, I can only speak on behalf of Volkswagen. We've committed to keep these targets for 2020. We've got these plans. And from our position, we would not call for an for a let up in these targets to become less ambitious. There is a question from Mr.
Schweiger from Branch Schweiger Zeitung. What is the lesson drawn from Corona in China? Doctor. Diess, you mentioned this during your talk. What can we learn from China for Europe?
Doctor. Diess is taking the question and answers. But we have to say that we weren't physically in China, but we had daily contact with our leadership team locally. There are more than 2,000 German executives in China who have experienced how the crisis was dealt with and overcome. We have 2 targets, maybe a late reaction, much later than it is here in Europe, but it's very much focused on containment, on stopping travel, on keeping people within the regions, avoiding the spread and cleanliness and sanitary measures for the entire population, more distance between people, wear masks, avoid traveling and to prevent a country wide spread of the disease.
And in the concept with that to be able to overcome the crisis economically, but maintaining the production and logistics chains to keep the economy running, critical components that were needed to overcome the crisis, to deal with the crisis under specific protection measures, but certain logistics and production processes were kept running. And as soon as people found that the health care system can deal with the crisis and were coming to grips with it. They were refocusing on restarting the economy and coming back to the production plans. And you'll see that in the course of the year, special measures will be taken to improve demand and to get the economy up and running again to make it healthy again. The crisis management seems very successful from where we stand in China.
And so we have hopes that our business in China could wrap up with quite a satisfactory annual result. I was just informed that the phone lines now have collapsed entirely. So if you have questions, please write me an e mail or a text message, then we'll answer them. The next question from Frans Johansen from Leipzig Volkswagen. He wants to know.
His question pertains the IDA 3. The annual report 2019, only 50 cars were built of that particular model. You're still seeing that despite the shutdown in Zwickau, you assume that the ID3 will start to be delivered in summer. Is that a realistic target that can be achieved? That's Mr.
Yuanzen's question. Mr. Diess answers, well Zwicker is well prepared for this. Mr. Kilian and I had the opportunity last week to see what it's like on the ground.
Production is well planned. The cars run through the lines. The quality of the cars has achieved a very good level already. I found it very positive that the team there really is behind this car, loves it. And many cars here around Vossberg as well are being tested in Zwickau Zweig.
The software completion rate of course requires complex engineering. Many people need to collaborate and jointly drive this forward. Here, we have introduced a lower number of meetings, allowed of groups that meet physically to deal with faults and bugs and to develop the software. So few meetings, but we assume that work can continue so that the ramp up for the RG3 will be running as planning in summer. The factory is really finished and the software will be by summer.
Thank you very much. The next question is from Mr. Zeierlein. From Kersaint Betriek. It's a dealership.
And how will Volkswagen support its dealerships if they have to shut down because of corona? And how the bonus how is that going to be possible if the bonus system is going to be corrected? Mr. Witter answers. And Mr.
Witter says, I'll start and my colleague Mr. Dan Demer can maybe complement. Well, liquidity, of course, is of the essence for our dealership organization. The target payment target due date is being discussed at the extensions of these deadlines. And we have many dealerships, for instance, with Volkswagen Bank, that customers and of course will be available to them, we'll continue that and that's a clear focus point because that of course is an instrument part of our business model, where the bonuses will be adjusted for the overall year.
That's surely not a discussion on the tops of everyone's minds because nobody has a realistic idea of what normal means and from when we can speak of normal operation in the different countries. Hardly any customers come in to look at the cars in the showroom. So many of these are shut. And surely, we will discuss this in the individual brands when the time is right. Cusen Tarvan does not want to comment, I think is quite happy with the answer.
So on to the next group of questions. I've got questions from Christian Hetzner from Automotive News. And topic 1 is on the battery cell. LG said seems to be responsible for the stop of the Audi e tron production stop. What are the consequences for procurement and sourcing?
And will that accelerate our plans to build another cell factory in addition to Zaleskilde possibly in the city of Emden? The question too is will Suikal be able to make the 100,000 as announced this year. On Audi, he wants to know whether we will see a new strategy for Audi under Markus Dussmann compared with May 2019, where Audi consequent, Audi was established by Bram Short. And why are we paying out a 3 digit €1,000,000 amount to repurchase a couple of Audi shares when you already have a control agreement in place and whether that is adequate in view of today's situation? And the last question on the regions, will
the group
achieve the breakeven and make a profit in the U. S? Again, I believe in your speech, Doctor. Diess, we've answered that question. What are the plans on Audi and on the battery cells and procurement?
Doctor. Zama. Mr. Zama says, maybe I should begin with the battery cells. For the Audi e tron, we've got 2 suppliers.
1 of them is LG. LG currently is producing in Poland, big ramping up there up to 70 gigawatt hours. And there are lines starting there that are have been delayed compared to the original plans. And as a result, once in a while, there are some interruptions in the supplies and they are felt in our Brussels factory where we produce the Audi E Tron. We are in constant contact with LG, working there with them on-site to solve the problems to secure the best possible supplies.
And we believe that productivity as a whole for the entire year will be achieved in order to ensure that we can meet our production, car production requirements. Now has this prompted us to think about an additional cell production plant? No, actually, because we saw from the word go that it will be difficult to that we want to ramp up production with our suppliers from Europe and from the Far East. Therefore, at a little point in time, we decided to set up a center of excellence in Salzkater to invest in that. And there we can go into the details of supply costs, technology structures.
And then last year with our partner Northvolt, we came up with a blueprint for our own battery cell production and in 2023 it will go from 16 to 24 gigawatt hours. So that means that supplies from LG have not provided us with any new knowledge. We're continuing with our dual strategy, supplying from internally and getting external suppliers too. Mr. Di says, with regard to Swigow, well, yes, a brief interruption of production of a few weeks in Sigao.
Although the crisis in China was 3 weeks production interruption and therefore the 100,000 MEB vehicles can still be built there. We can still do that and we therefore currently believe that this will be achieved. That number, Audi new strategy, German name, Konstekfend Audi. I don't think there's a need for a short term change at Audi. Audi has a product strategy which in my opinion could be very successful in the years to come.
And in terms of processes and costs, Audi has their cost cutting program called Audi Zukunft, Audi Future, and they're very systematic in their work there. Over the long term, of course, Mr. Duisman will set some new emphasis at Audi. Audi is a technical part of the group. Forsprung der Technik has to come from Ingolstadt.
And of course, we expect new stimulus from the new team there. Then there was another question, the third one. There was an add on about the squeeze out. You should do the squeeze out. Mr.
Berto says, yes, I'd be pleased to. As you know, Volkswagen AG currently owns 99.64% of Audi shares. And as a result, the free float of Audi shares are marginal, very small. Now there are very good legal reasons for this. If you look at German there are this can cause some very complex situations with regard to the Volkswagen Group.
So if we were able to just reduce this to one set of duties with regard to capital markets, that would give us major advantages. We're talking about substantial costs here every year due to reporting and AGMs and so on. And as a result, the decision that we made did quite make good sense and it was right. Of course, it's important to look in the weeks months to come at developments in terms of the corona crisis to see what we can or can't do or how we should prioritize things and how we should do the timescale. In terms of the content, we are still convinced that this is the right step to take.
And if there are new factors, we'll constantly take them into account and reassess the situation. Okay, thank you. Profit outlook, U. S, I think we've already talked about that. Our next questions are from Bill Boston from The Wall Street Journal.
He'd first of all like to know about production in January February, how that developed and whether a detailed outlook, at least for the Q1, could be provided in terms of production, deliveries and EBIT and perhaps even the first half of the year for 6 months. And the 3rd group of questions is about cash outflows for acquisitions that have been
announced and
the outlook. He just wants to understand what was meant there, Navistar battery capacities and whether or not the plans are going to be changed in light of the coronavirus and its impact, whether they'll be postponed or whether this is retroactive? And then you'd like to hear about the production stoppage and what this means in particular for the factories in Chattanooga and in Mexico and what it will mean there in the weeks to come? And then last question, last group of questions are about CO2 compliance, whether or not a postponement of that is going to be implemented in order to allow objectives to be met. Mr.
Vitta says, I will begin, Mr. Boston. This year as a whole still can't be predicted. We mentioned that already. January, February, in terms of production, sales, deliveries, everything is more or less about 15% below the figures for 2019.
This is no surprise. One of the biggest factors here is and remains the development in China. The mentions I just told you about are for the group as a whole. But if you take China out, developments, as Herbert Diess mentioned, were that basically February didn't happen, but in March, we believe that the market is heading toward back toward about 1,000,000 vehicles there and as a result developments vary. China is now recovering on a recovery path and other markets such as Europe are now feeling major negative impacts.
And as a result, a forecast for EBIT for the first quarter is extremely difficult. I could perhaps at least just give you a general idea. In the Q1 2019, we had about €4,800,000,000 which was a margin of 8.1%. So it was a very strong quarter in terms of EBIT. And I believe that on that basis, we'll be cutting that by at least half.
The cash situation that is and remains our focal point in addition to our focus on our workers and families and their concerns and then core processes. And as a result, as I indicated, we're looking at that and are also looking at our M and E activities. We're prioritizing those M and A. It's the squeeze out and other measures too that we're looking at. So we're very sensitive in terms of our liquidity position.
On the other hand, of course, despite everything, we've got to continue to set the right strategic course. And this includes, for instance, our partnership with Norfold. And we've got some important strategic discussions going on in China, too. So as a result, we must not completely lose sight of the strategic dimension. But in terms of the time scale for implementation, we perhaps might have to show some flexibility that we hadn't planned for so far.
But I think this is quite obvious in view of the current circumstances. Chattanooga, Mexico. Nothing, Mr. D says, well, so far no impact in Chattanooga or Mexico. We'll have to wait and see how the crisis develops.
Okay. I believe that we answered all those questions. Steven Rimmitt also for The Wall Street Journal also had similar questions about M and A activities, and I think we also answered those. And as a result, the next question is from the legacy from the BBC. He asked about the dedicated plans for Wolfsburg and whether the factory will be shut down.
Go ahead. Gunnar Kilian says, well, we're also discussing things for Wolfsburg. We're talking about how long production will continue this week, and we will have the final discussions in the brand today and then communicate those decisions.
Next, two
questions from Jack Huing, New York Times. First question, do we expect that the consolidation process in the automotive industry will be accelerated by the corona crisis and whether the automotive industry will look different after the crisis is over and what teachings can be drawn from the crisis, for instance, whether or not the supply chain has to be done differently. Well, says Mr. Dietz, the consolidation trends in the industry actually were occurring before the crisis. The industry is still very consolidated.
We've got just a few groups that do about 5,000,000 to 10,000,000 vehicles. In addition to that, you've got premium manufacturers that are still independent. We do believe that due to the new and very complex technology, there will be further consolidation. It will come from autonomous driving and the interconnection of vehicles. The one off expenditures are immense and the economies of scale will be greater due to the economies of scale and how important they are.
I think 10,000,000 units is big enough. It's hard to imagine that from well that we would be able to generate additional economies of scale in the current value chain. So therefore, we're not in search of new partners. We are working with Ford in a partnership there. That's a good idea.
And then of course, we're working with them in commercial vehicles and commercial vehicles in the United States. And as a result, it is not our focus to further change things as a result of consolidation. In technology terms, of course, we'll be taking further steps, software in cars and MEB, our electric platform. Then the second question was could you help me out there? What was the second question?
What we can learn from the crisis?
What we can
learn from the crisis and whether the supply chains should be done differently? Well, supply chains, maybe you could do that, Mr. Sommer. Mr. Sommer says, yes, to begin with, I'd like to pay my compliments to our supply chain and all of our suppliers.
This is something that I've got to mention here. If you look at the production in China and the logistics chain, how it was restricted there, And the same applies to Europe too, of course, a little bit later, together with our purchasing people and our engineering people and this logistics chain, it applies to production and supplies. We've always found a way up to this very day to come up with approvals for alternative technologies and come up with new logistics channels and sometimes massive efforts were needed in order to keep up production. So as a result, I think that with our strategic global positioning position that we have, including in purchasing together with our suppliers. I don't think there is a fundamental need for renewal there.
We are well positioned here. Of course, there is a global pandemic now. And of course, we can't be prepared for that for all eternity. Everyone understands that. So we'll leave it up to our experts to decide what to do in terms of our supplies and we'll have to look above all to the future to decide what impact that will have, including on our stability, including financial stability of our supply chain.
We can't say that yet today, but this is definitely something that we are going to be looking at analyzing our analysis capacities and our communication here will be strengthened, but this is something that we can't say yet precisely due to the supply situation. Thank you. And we have 2 sets of questions from Karsten Stevens, Bursen Seitel.
One question on the building and the expansion of the software competence. Is there a time line beyond the target to have 10,000 digital experts by 2025 exceeding that target? What significance would additional purchases and partnerships would have? What is planned in what areas do we see the biggest gaps? And the second group of questions focuses on the diesel crisis.
Question to you, Mr. What are the charges incurred after the year 2019 as an aggregate total? And what was the cash outflow in 2019? And what do you expect for 2029, 2020 and possibly the following? The personnel starts answering.
May I begin with the software consequence? By 2028, we want to invest €7,000,000,000 in our own software competence. The software organization with the associated subsidiaries, we want to create our digital platforms across all brands, developing them there and launching them in the market, of course. Then
we will
further look into new technologies, The digital skills needed in the market will be developed. Surely, no detailed plans on possible acquisition needed have been drawn up. We concentrate on the core competencies, stability, software architecture and cloud computing, data handling and connectivity, of course, to be able to create the digital experience for our customers we have in mind.
At the moment, we see
that there are no dramatic gaps in these areas. But using partners, acquisitions and our own competencies, we are putting everything in place that the market would need in the future. Mr. Vittar, let me focus on the diesel issue. The special items in operations as an aggregate total were EUR 31,300,000,000 for financial 2019, EUR 2,300,000,000 In 2020, we expect 2,900,000,000 and in 2020, 1,000,000,000.
As an aggregate total has outflow the special item around about yen 26. 6,200,000,000 were done. In 2019, it was EUR 1,900,000,000 correction, which we paid out 2.9 in 2020 and in 2021, it's 1.2.
Thank
you very much. The next question Trimuna, De Automation. He has two questions. 1st, when will we appoint the new Head of Seat? And why has the VWO decided to have the commercial comeback of the set brands in China in 2021, 2022 delayed or cancel it even?
I think it goes to Doctor. Diess. Yes, Doctor. Diess. I'm pleased we've taken this decision.
SEAT wanted to start in China, but they would really have chosen the worst possible time to do that. Last year in 2019, we saw that we had a very strong year indeed in China, winning market share in the group, the brands from Audi and Porsche. We likewise felt that the smaller brands in this consolidation phase of 2019 did suffer. We had to suffer setbacks with Skoda and Skoda has been in the Chinese market for 10 years with a large product portfolio and Skoda has had a very difficult year with losses incurred there. And so I believe it's safe to say that sales took the very fortunate decision not to enter that market in 2019 2020.
China is a very big market. So you have to put in a lot of effort and resource to enter that market, probably for an entry into the volume segment of passenger car production. It's too late. There will be another clear consolidation phase. There will always be niche brands, but the growth potential of SEAT is in more European markets.
SEAT has very small market shares in Spain, Italy and of course, Latin America. That's a growth field surely. And I'm very pleased to see that SEAT has been able to tap higher market segments, more luxury market segments with the SUVs, with the TRANCO. The sales value has grown stronger than unit sales and we are confident that by more qualitative growth, we'll let SEAT forge ahead. They had a very successful year in 2019, a very strong team.
They've achieved a lot and we are working to fill that leadership position and solve the succession. Let me thank all of those who've come and answered questions here on stage and contributed and those who've joined us on the phone lines. I've just looked through my queues. Have not received any other questions by journalists either by text message or email. And the phone lines that are still running have no more questions in the queue.
So that would wrap up. Thank you for joining us. In the course of the day, we'll probably come back with some details on the effects of the shutdowns planned for the individual brands. Mr. Kilian has said we would do that in a well ordered and calm process and we'll get back to you in the course of the day and otherwise the entire department will be available for any questions you might have to take them during the course of the day.
In the afternoon, we'll have the analyst call, to which you are most formally invited to join us on the analyst call when more questions are answered. Thank you.