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This GM Rival Is Upping Its Game

By John Rosevear - Apr 8, 2013 at 6:00PM

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Volkswagen isn't a huge presence in the U.S. -- yet -- but the German giant is mounting an all-out global effort to blow past GM and Toyota by 2018.

Who's the biggest automaker in the world?

For a long time, there were only two possible answers to that question: Detroit giant General Motors (NYSE: GM), which held the crown for years (and stole it back in 2011), and Japanese colossus Toyota (NYSE: TM), which came on strong last decade and won the title again last year.

But now there's a third entrant in the race to become king of autos. And last week, this automaker gave another big indication that it's pushing hard to up its game.

VW's push for global domination
That automaker is Volkswagen (NASDAQOTH: VLKAY). VW has made no secret of its ambition to become the No. 1 selling global automaker by 2018.

In an interview last week, VW works council chief Bernd Osterloh told German newspaper Handelsblatt that the automaker is planning to boost its global headcount by 9%, from 550,000 to 600,000, by 2018. It's part of VW's ambitious plan to overtake both GM and Toyota in overall global sales.

Needless to say, most of those new hires won't be in VW's home base of Europe. VW is the European market sales leader, but Europe isn't where the growth is – in fact, protracted economic slumps in many European nations have hammered auto sales in the last couple of years.

Europe's economic weakness is a big part of why VW is pushing so aggressively to expand overseas. Like rival GM, VW has a huge, well-established presence in China. GM has been the China market leader for nine years now, but VW's total 2012 sales in China were close behind the General's.

Poised for expansion in China and the U.S.
Like Ford (NYSE: F), which has been investing heavily to expand its presence in China, VW is expected to make a significant expansion push in the Middle Kingdom over the next few years. VW executives have said that they expect to nearly double the German automaker's production capacity in China between now and 2018.

VW also sees the U.S. as a significant growth opportunity. So far in 2013, the VW brand has just a 2.7% share of the U.S. market, with VW's luxury Audi brand adding another 0.9%. Audi in particular may have room to grow: The brand is the luxury-car market leader in China, but trails its big German rivals – along with Toyota's Lexus and GM's Cadillac – here in the U.S.

VW already leads Toyota and GM in profits
In one way, though, VW is already the global automotive leader, thanks to its efficient engineering approach and its very profitable Audi brand. VW was the most profitable automaker in the world in 2012, with $15 billion in pre-tax profit. Toyota's $11.1 billion operating profit and GM's $7.9 billion pre-tax total were a long way behind.

But VW and its shareholders want more. Will the German giant really leave GM and Toyota behind? Stay tuned.

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