Opportunities and risks from mergers & acquisitions and/or other strategic partnerships/investments
No risks with a score of 20 or more were reported for this risk category.
Opportunities and risks from partnerships
As part of our Group strategy, we are stepping up our efforts to forge partnerships, both for the transformation of our core business and for the establishment of new areas of business.
We are increasingly concentrating on partnerships, acquisitions and venture capital investments. Our intent here is to generate maximum value for the Group and its brands and obtain the opportunity to expand our expertise, particularly in new areas of business. Our innovative presence in the markets supports this process. We enter into partnerships at a local level to help us identify regional customer needs more accurately, establish competitive cost structures and thus develop and offer market-driven products. At the same time, partnerships are associated with the risk that the interests of our business partners might differ from our own or that common goals cannot be achieved, for example due to insufficient financial performance. Furthermore, specific risks and expenses may arise from the provision of data and systems in new development partnerships in a way that meets the requirements of the relevant jurisdictions (e.g. national data protection law) and roles (e.g. the need-to-know principle of the Volkswagen Group). To mitigate the aforementioned risks, development partnerships receive not only technical support but also assistance on legal and IT-related aspects.
Close interaction with partners in the field of e-mobility in the form of partnerships and joint ventures supports technological change. Examples include battery development, software development, mobility solutions and the development of a comprehensive charging infrastructure. This cooperation involves risks such as an increased coordination workload, more complex decision-making processes and the loss of expertise. At the same time, opportunities are presented by the pooling of specialist knowledge, by horizontal and vertical integration and by better use of resources. Volkswagen has therefore created cross-departmental teams to closely support all such partnerships.
The marketing of the Modular Electric Drive Toolkit to third parties, for example as part of the strategic alliance with Ford, could result in damage claims in the event of problems with procurement, production and quality.
Volkswagen owns a large number of patents and other industrial property rights and copyrights. Patent and licensing infringements may also arise in partnerships and thus result in the unauthorized disclosure of company-specific expertise. Volkswagen monitors the sales markets and also protects its expertise with legal action.
Risks arising from the recoverability of goodwill or brand names and from equity investments
For the goodwill recognized in the financial statements and for brand names, as well as for equity investments, there is a risk that the carrying amount of goodwill may be higher than the recoverable amount and that an impairment loss must therefore be recognized. At least once a year, Volkswagen tests whether the value of the goodwill or the brand names might have been impaired. It bases these tests on the underlying cash-generating units. We also regularly test the equity investments for impairment. The determination of a possible impairment of goodwill and the acquired brand names as a result of the impairment testing depends to a large extent on how the legal representatives estimate the future cash flows and calculate the discount rates to be applied in each case. Against the backdrop of the ongoing transformation of the core business towards e-mobility and digitalization, the shift to self-driving vehicles and stricter environmental requirements, there are uncertainties to be considered in the estimate of the Volkswagen Group’s future share of the battery-electric vehicle market as well as the achievable margins and long-term growth rates. Uncertainties relating to a possible delay in the enforcement of e-mobility and the stiff competition from China also need to be taken into account. The estimates are subject to risk and may be revised if environmental regulations or market conditions change. Potential effects are taken into account in our medium-term planning and thus in the calculation of future cash flows, including in impairment tests. If there are objective indications that the recoverable amount of the asset concerned is lower than the carrying amount, Volkswagen recognizes this as a non-cash impairment. An impairment can be caused, for example, by an increase in interest rates or deteriorating business prospects.
Risks from the disposal of equity investments
An unexpected need for funding may lead to a situation in which assets have to be sold for a lower amount not equivalent to their value.