VW conquers the world
Germany’s biggest carmaker is leaving rivals in the dust
When Ferdinand Piech arrived as Volkswagen’s chief executive in 1993, things looked dire. The carmaker was overspending, overmanned and inefficient, and had lost its reputation for quality. How things have changed: last year the VW group’s profits more than doubled, to a record 18.9 billion ($23.8 billion). As other European volume carmakers seek to close factories and cut jobs, VW is seizing market share in Europe, booming in China and staging a comeback in America. It plans to spend 76 billion on new models and new factories by 2016. Its global workforce is more than half a million, and growing.
It took years for Mr Piech—now chairman, but still with his hands firmly on the wheel—to tame VW’s menagerie of semi-independent brands and get to grips with its global empire of factories. He has been a ruthless hirer and firer of executives: only last month Karl-Thomas Neumann was removed as head of VW’s Chinese operations, supposedly for his disappointing performance, despite the juicy profits VW is making in China. Mr Neumann had been talked of as a possible successor to the chief executive, Martin Winterkorn.
Mr Piech is a grandson of Ferdinand Porsche, who founded VW after Hitler called in 1934 for the creation of a cheap “people’s car”, a Volkswagen. The Piech-Porsche clan controls both VW and Porsche, a sports-car maker that is now being folded into VW after the failure of an overambitious and highly leveraged reverse takeover. On July 4th VW agreed to buy the 50.1% of Porsche it does not yet own for 4.46 billion.
VW is also buying Ducati, a maker of fancy motorbikes, and consolidating MAN and Scania, two lorrymakers, into its commercial-vehicles division. Yet still the firm remains hungry. It has long coveted Alfa Romeo, a premium-car division of Fiat; and is rumoured to be eyeing up Navistar, an American lorrymaker. Mr Winterkorn nevertheless dismisses the suggestion that the group is getting unmanageably big.
Mr Piech’s plan was for VW to become the world’s biggest carmaker by volume by 2018. Last year, however, as Toyota struggled with the aftermath of Japan’s tsunami and GM floundered in Europe, VW reached its goal seven years early (see chart), if you do not count Subaru, Toyota’s distant affiliate, or GM’s Wuling joint venture in China, which mainly makes Chinese-branded cars.
The 8.5m vehicles VW made last year cover all corners: Volkswagen, Skoda and SEAT in the mass market; Audi in premium cars; Porsche, Bugatti and Lamborghini in sports cars; Bentley at the luxury end; plus various commercial-vehicle brands. Most (SEAT excepted) are firing on all cylinders. IHS Automotive, a forecaster, expects VW easily to beat its target of 11m sales by 2018.
Fierce competition and regulatory pressure to develop alternative-fuel cars are forcing other makers to seek cost-sharing partnerships. Toyota and BMW are teaming up on low-carbon technologies. GM’s Opel division in Europe is joining Peugeot-Citroen to make smaller cars. Daimler is edging towards a threesome with the Renault-Nissan alliance. Sergio Marchionne, the boss of Fiat and Chrysler, recently suggested merging several European makers to create “another Volkswagen”.
Volkswagen has been better than its rivals at reducing the number of common “platforms” that its cars are built on. This allows it to offer a fabulous variety of brands and styles while slashing manufacturing costs. The next stage, launched this year, is a versatile platform codenamed MQB, which will underpin the VW Golf, Audi A3, Skoda Octavia and SEAT Leon, in all their variations.
Wolfsburg’s lone wolf
VW’s size means it seldom needs partnerships with rivals, says Mr Winterkorn. Perhaps this is just as well. Judging by its botched hook-up with Suzuki, a mid-sized Japanese maker, VW is not much good at romance. Suzuki’s boss, Osamu Suzuki, has filed for divorce and is taking VW to arbitration to force it to sell its 19.9% stake in Suzuki. Among other things, he has complained of being treated like a subsidiary, rather than a partner. VW had hoped to develop cheap cars for emerging markets with Suzuki, which is big in India. Now it must do so alone, at considerable cost.
In many of the 26 countries where VW has factories, it has been around long enough to be seen as a domestic firm, so protectionists usually leave it alone. The founding family’s controlling shareholding, and a blocking stake held by the state of Lower Saxony, where VW is headquartered, allow it to resist short-term pressures to pull out of any market that turns difficult. Rivals envy the stability this brings, especially just now, says Mr Winterkorn.
VW can cope with a collapse of the European car market. Others must make deep cuts—or perhaps even, in the case of GM (which has lost $16 billion in Europe since 1999) and Ford (which gave warning on June 28th of deepening losses there), pull out of the continent altogether.