Volkswagen to Broaden Financial Services

FRANKFURT -- Volkswagen AG said it will soon substantially broaden its offering of higher-profit financial services in Germany.

At a press conference Thursday, two directors of the company's Volkswagen GMBH subsidiary said that "financial services such as leasing, financing, and the recently introduced credit card system have a growing importance as revenue-generating instruments" for the VW group.

The directors indicated the expansion, though aimed at a broad array of financial services, will especially seek to fill out profitable market niches such as specialty insurance products and retail banking.

Pressure on German Banks

But by reaching out to grasp more of the lucrative consumer financial services market, Volkswagen will also be putting competitive pressure on German banks, which traditionally have put far more effort into expanding wholesale banking businesses than into retail lines.

Volkswagen's banking operations appear already to charge less than many German banks for general-purpose consumer revolving credit lines and to offer higher rates of interest on simple savings accounts.

Stronger Ties with Customers Sought

The broadening of Volkswagen AG's financial services business is aimed not only at boosting profits but also, in large part, at bonding auto buyers with the Volkswagen brand.

"In the future, Volkswagen will use financial services more and more with the aim of cementing its relationship to its customers," said Udo Schuelke, head of VW's Finanz V.A.G. leasing arm.

VW Finanz is a holding company Volkswagen set up in March to house its V.A.G. bank division and the car leasing business, both of which concentrate on the German domestic financial services markets. The leasing unit is Europe's largest, VW said.

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