Raking in the profit for an automaker seems like the ultimate accomplishment, and when you sell millions of cars around the world the final tally can reach satisfying levels.
For example, the Volkswagen Group recorded an after tax profit of 11.7 billion, Euros, last year. However, even such healthy profits are often times not enough in the eyes of investors as Volkswagen has recently targeted 5 billion Euro a year of cuts that it sees necessary to shore up its margins. Certainly some of the cuts will come from the usual places that make the most sense, smarter purchasing, cutting factory costs and even eliminating some of the least profitable models. Yet, cuts will be done to R&D as well as VW has seen its R&D spending surge by 80% in the last four years. In general R&D spending should lead to better products and the latest Passat is a good example, a family sedan that will come with up to 240 horsepower from a 2.0 TDI diesel or 280 from a 2.0 gas turbo. Numbers never before seen from diesels and only on high strung gas turbos are now mainstream. Certainly these engine developments don't come cheaply and future improvements could be stymied with the cuts.
Should profitable automakers like Volkswagen ignore calls for more margin and instead focus investors on their product?