VW plans to cut its prices

VOLKSWAGEN plans to cut its selling prices and costs by more than 10 per cent in the next few years, the group's chairman said, writes David Bowen.

In an interview in the Suddeutsche Zeitung, Ferdinand Piech warned that the German and European car industry needed to make 'quantum leaps' in its products and production methods if it was to continue to exist alongside Japanese car makers.

Volkswagen has been squeezed by a combination of a strong mark, high labour costs and a falling home market, and Mr Piech has been campaigning to cut costs for the past year.

He announced at the beginning of this year that 30,000 jobs would be cut by the end of 1994. His controversial hiring of Jose Ignacio Lopez de Arriortua as head of production was part of the drive to force down the cost of supplies.

Mr Piech's intention to cut the selling price of cars could mark a new direction, however.

'Thanks to the exchange rate, the German market has become one of the most expensive countries in which to buy a car, from being among the cheapest,' said John Lawson of the motor consultants DRI.

But, he added, the appreciation of the yen against all European currencies, including the mark, had partly relieved price pressure from Japan. Nissans, Toyotas and Hondas manufactured in the UK could prove a greater threat.