Will $106 Billion Be Enough To Fix Volkswagen?

Volkswagen isn't giving up on its plans to challenge General Motors and Toyota for world auto domination.

Despite very limited success in the North American market since deciding to move the needle on weak market share, VW is doubling down.

On Friday the company announced it will invest 85.6 billion euros ($106 billion) in its automotive operations over the next five years on foreign expansion, models and technology to back its quest for global leadership even as it carries out an austerity drive.

The German group said the bulk of spending would go toward developing a range of sports utility vehicles, as well as on modernizing part of the light commercial vehicle portfolio.

Currently, SUVs sales are booming - driven by a combination of lower gas prices, easy availability of credit, and a general sense among consumers that they can afford higher operating costs and need vehicles that offer more flexibility than traditional small- and midsize sedans.

At the same time, VW also plans investments in new vehicles and successor models in almost all vehicle classes, which will be based on the modular toolkit technology and related components, the company said in a statement.

VW, which had used resilient profits during the previous European auto slump to expand its footprint in China and North America, reckons it can solve the conundrum of not cutting back on key projects while saving the hefty sum of 5 billion euros.

Nevertheless, there's a perception that the company hasn't been able to get its product mix right, particularly in the U.S.

Volkswagen's Chinese joint ventures will also invest 22 billion euros, the company said.

(1 US dollar = 0.8049 euro)

(Reporting by Andreas Cremer and Edward Taylor; Editing by Kirsti Knolle)