1

• Hybrid Strategy • Disperse decision-making

power: business function and organization structure

• BoD approval• Set the cultural tone

STRA

TEGI

C IS

SUES

Inn vo ConsultingW

AY FO

RWAR

D

Strategic Sourcing of

Cobalt Supplies in

Africa

Paris Accord and

Environmental Legislation

Product Portfolio

RationalizationE-Mobility Strategy

Strategy, Structure, Cost

Optimization

1 2 3 4 5

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

1

~Connecting the dots, globally~

• Secure EVB contract –Panasonic

• Integrate batteries into VW ID series

• Deploy Uber marketing campaign

• Renegotiate EVB contracts for new capacity

• VW SA brand performance audit

• Seize unprofitable vehicle production

• Conduct for all brands & markets; make capacity for EVs

• Secure funding for capital project

• Develop MEB platforms• Replace existing engines• Begin product of innovative

models• Adapt to new Paris standards

• Leverage Rwandan facilities for ethical compliance

• Develop Supplier-Business Practice Policy

• Ethics & compliance audits for regional subsidiaries

2STRATEGY, STRUCTURE, COST OPTIMIZATIONDeveloping a clear management strategy for long-term profitability

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

CEO’s recommendation: centralize certain business functions for cost savings

Ethical Dilemma: high consolidation of power at senior management

ESTABLISH HYBRID STRUCTURE (CENTRAL + DECENTRAL)

€9,073.80 M€38,911.2 M

High

NPV

COST SAVINGS

ANALYSES

RECOMMENDATION

Centralized Pricing Trade Discounts HR (S&W) Direct Factory Overhead

Configuration of Value Chain activities; fund E-Mobility

Decentralized Advertising Firm Infrastructure Inbound & Outbound logistics

Service High local responsiveness; think global, act local

PHASE 1: BUSINESS FUNCTION

ORGANIZATION STRUCTURE

CURRENT DESIRED

• Disperses decision-making power and organizes structure• Segregate’s duties in management - avoids consolidation of power• Effective functionality at global platform

3STRATEGY, STRUCTURE, COST OPTIMIZATIONUse culture summit to align employees values with the company’s

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

Management must attain Board of Directors approval to implement these structural changes Organized group structure ‘Glocal’ outlook Long-term profitability

PHASE 2: BoDAPPROVAL

PHASE 3: SETTING THE TONE

VW SA’s CULTURE SUMMIT

Purpose: Align employees values with company’s by enabling them to create a culture they want to work in

• Responsibility• Honesty• Bravery• Diversity

• Pride• Solidarity• Reliability

What?

Why?

How?

• One-day conference mandatory for all regional employees

• Filled with:• Team building activities • Networking lunch• Leadership workshops • Keynote Speaker: Thomas Schaefer

(MD of VW SA)• Panel of VPs and their vision for VW

SA

Change Champions • Volunteer leaders and employees that create

a change accepting environment• Promote new ideas, support vision, and

encourage others to share the experience • Incentivize employees with rewards: gift

cards, free lunch, raffle tickets, etc. to encourage positive behavior

Values:

Vision: Shaping mobility – for generations to come

4E-MOBILITY STRATEGYOutlining the strategic partnership with Panasonic for EVBs to integrate with EVs

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

EVBsSecured

• Ethically Sourced• Reliably Sourced

• Cost Effective

VW AG Steering Committee

VW AG Regional Director

Ethical Standards

Director

Reliability Maintenance

Officer

Panasonic Director

Ethical Adherence

OfficerReliability

Assurance OfficerBatteries

integrated into the VW I.D., Crozz, Buzz & Vizzion

Cross Company Task Force Integrating Batteries in the VW I.D. Series

1. The acquiring option scores highest on development alternatives 2. Panasonic is lowest cost tender

AnalysisMeasured all supplier tenders in a decision matrix. Panasonic is optimal in cost & quality, range, etc.

ChoiceAcquiring batteries through S1 – Panasonic allows VW AG to achieve Strategy 2025 and launch 50 EV’s

Implementation

5E-MOBILITY STRATEGYTargeting Millennials through Uber & Incentives will increase revenue, and market share

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

Engagement Channels

Celebrity Drivers in each key market

Uber promo codes developed

Uber I.D., Crozz & Buzz to be used in key markets like South Africa

Social media engagement online

Drivers are trained on the USP’s of the car to help “sell” the vehicle

Locations of Government incentives for plug-in electric vehicles

27 European Countries

Morocco & soon South Africa

No EV incentives in South America:

Canada, USA & Mexico

China, India, Philippines, South Korea & Japan

Australia & New Zealand

Category 2019 2020 2021 2022 2023 2024 2025 Total EV’s Launched Per Segment

Volume 4 5 5 5 4 5 4 32

Premium 1 2 1 1 1 0 2 8

Super Premium

1 2 2 1 2 1 1 10

Total EV’s launched per year

6 9 8 7 7 6 7 50

Uber I.D. User Interface

Category & Segment MatrixUberID

Your Uber I.D. is on its way!

+

Allowing consumers to feel financially secure when purchasing EV’s

Target Market: Millennials (23-38); male & female

6E-MOBILITY STRATEGYPotential of Solid State batteries and ensuring long-term sustainability for VW AG’s EVs

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

1

Reduces EV charging time to 10 minutes

At least DOUBLESthe RANGE of Li-ion batteries

Solid State Battery Advantages

4X longer lifespan

2021 Solid State Market Value:

$1,689.50 MILLION

75% smaller battery size; significantly lighter

50% of the volume for the same power

2

Does not contain explosive material

Products & CapabilitiesCompany Background

CEO: Vincent Yang 460 employeesLocation: Taipei, Taoyuan

Patents: Total 212 (Issued: 129 / Application: 83) ( till 2018/12)ProLogium owns 100% of their technology

Capital: 11.38 Million USD

Products: LCB (Lithium Ceramic Battery)

Fast Charging: charge 12mins to get 60% power; and 30mins 82% power

Fully developed 3rd generation Solid State Batteries that can be mass produced with 3 factories in Taoyuan

3

7PRODUCT PORTFOLIO RATIONALIZATIONVW AG must cut costs to effectively manage their resources and create capacity for Strategy 2025

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

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HOIC

E

Evaluate and cease production of models that do not have an operating margin of

6.75%

To maintain VW AG’s vision, must consider insights…

1. Volume Segment = Lowest contributor to bottom line

2. Audit brands below 6.75% operating margin goal

3. Net Profit Margin = 11.92%

8PRODUCT PORTFOLIO RATIONALIZATIONVW AG must eliminate brands that do not meet the operating margin to increase profitability

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

PHASE 1• Audit brand’s performance in each region• Provide job assistance to employees that have lost

jobs due to restructuring

Tiguan Beetle

Passat

Golf Sportsvan

Polo Vivo Hatch

Touareg

CC

Golf Cab

Touran

Polo

Up!

Polo Sedan

Golf 6 + 7

Scirocco

Jetta

PHASE 2• Cease production of unprofitable vehicles• Evaluate changes using a balanced scorecard

€3,509.06 M realized when operating with a 6.75% operating margin for all vehicles

PHASE 3

Update EliminateEvaluate

• Continue the process of performance auditing brands and models

9PARIS ACCORD & ENVIRONMENTAL LEGISLATIONIdentifying the appropriate capital project to develop the MEB platforms technology

Phase 1: Funding

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

OPTION 2:Initial Cost of €11,750 M €4,474.34 M

NPV (Value Added)22.4%

IRRFastest Payback Period

Phase 2: Integration Phase 3: Measuring

62%

38%

VW AG'S CAPITAL STRUCTURE TO FINANCE OPTION 2

Debt Equity

• Debt Financing = €7,238 M • Equity Financing = €4,512 M• Limits company control given to investors• Working Capital = €3,518 M covers Paris Accord fine

• Initiate adjustments of existing engines in product lines

• Start construction of MEB platforms

• Test MEB platforms and adjusted engines to meet requirements

• Measure process efficiency• Standard quality must meet Paris

Accord legislation• Begin production of innovative

models – ID series

Functions Benchmark

Internal business process 6.75% operating margin

Financials Net Profits increase 10%/yr. to 2023

Emission Targets Lower than 99gCO2 km

Customer Catered for target market

• Measure efficiency of MEB platforms• Make changes to MEB platform and product

lines as Paris Accord changes roll-out

10TIMELINE AND RISK MANAGEMENTIdentifying the roadblocks in the implementation plan to drive Strategy 2025

Strategy Structure Cost Optimization

E-Mobility Strategy

Product Portfolio Rationalization

Paris Accord & Environments Legislation

Risks

1

23

4

Mitigation CONCLUSION

Year 1 Year 2 Year 3 Year 4 Year 5

Governance risk between VW HQ and regional subsidiaries

Panasonic pulls out of the deal

Market / Reputation about EV testing & emissions

Risk reduced through transparency with shareholders and public with the use of press releases

Group’s CEO communicate the harm of keeping unprofitable brands while stressing sustainability in E-Mobility.

Work with Supplier 3 & renegotiate contract to include shipping costs

Communication stresses regional offices act locally and uphold global objectives. Done through an intranet

Resentment among senior management team due to segment restructuring

4

Integrate batteries & launch Uber marketing & gain gov incentives

Supervisory Board’s Approval

Gain project financing

Brand Performance

AuditGlobal Brand Performance Audit

Continue launching EV’s

Cease production of unprofitable vehicles

Setting the tone

Secure new battery agreement

Dispersing Decision Making Power

Acquire batteries

Continued adherence to emission standardsIntegration & Testing of MEB

Developed a clear management strategy

Created a targeted marketing campaign to sell 50 EV’s by 2025

Eliminated vehicles not at operating margin creating profitability

Invested in MEB’s to produce a sustainable, scalable future

Exec Summary Strategy E-Mobility Product Rationalization Paris Accord Timeline & Risks

12

3

High

High

Low

Low

Impa

ct

Likelihood

Critical Risk Line

4