Automotive News Europe - September 22, 2010 - 40

Automotive News Europe | Battle of the Giants

VW CEO Martin Winterkorn

On top of the world
VW could reach No 1 goal early
V
olkswagen AG’s lofty aim of becoming the top global automaker in terms of car sales, profitability and customer satisfaction isn’t looking as outrageously ambitious as many in the auto industry once believed when CEO Martin Winterkorn first unveiled the goal in a company meeting in 2007. VW could be No. 1, at least in terms of volume, in 2012, six years ahead of its publicly stated target of 2018, a VW executive who attended a high-level internal strategy meeting in early September told Automotive News Europe. Boosted by China’s auto boom, record sales in Brazil and by a significant recovery into the U.S. market, VW is targeting a second consecutive year of record sales in 2010. The company is also making money. Goldman Sachs predicts VW will report 4.5 billion euros in operating profit this year, rising to 6.5 billion euros in 2011 and 8.5 billion euros in 2012. VW is also aggressively recruiting senior-level managers from competitors. The company has raided General Motors Co. and Fiat S.p.A. for senior executives and has drafted several managers from its Porsche affiliate. The new people picked by VW Chairman Ferdinand Piech and CEO Martin Winterkorn demonstrate that Europe’s biggest automaker is systematically addressing its weakest areas. Here are some examples: In the U.S., VW and sister brand Audi consistently achieve results below the industry average in the closely watched J.D. Power and Associates annual quality studies, hampering efforts to improve sales in this key market. Frank Tuch became VW’s chief quality officer on Sept. 1. Winterkorn is an admirer of Tuch’s work in his previous post as Porsche’s director of quality management and credits Tuch with Porsche’s rise to the No. 1 spot in the 2010 J.D. Power and Associates U.S. Initial Quality Survey. Jonathan Browning, GM’s former head of worldwide sales, is the new head of Volkswagen of America and will continue VW’s ambitious multibillion-dollar expansion in North America where it hopes to triple VW and Audi sales to 1 million by 2018.
I

VW has never been able to build small cars at a profit. Former Opel Managing Director Hans Demant will take charge of international project coordination for VW starting Oct. 1. He will be responsible for the company’s relations with Japan’s Suzuki Motor Corp., the small-car expert and India market leader now 20 percent owned by VW. He is likely to push for joint product development between Suzuki and Skoda for India and China.

production capacity to 3 million units a year over the next two years.
I

From Porsche, Klaus-Gerhard Wolpert, who led development of the best-selling Cayenne premium SUV, has been tapped as VW’s new chief product strategist.

RACE TO THE TOP
Sales of the world’s top three automakers in millions. Toyota GM VW H1 2010 4.17 4.15 3.61 H1 2009 3.56 3.56 3.12 % change 16.9 16.8 15.8

Toyota includes Toyota, Lexus, Daihatsu and Hino. GM includes all 100% owned brands and China’s Wuling. Saab included through February 2010. VW includes all car brands and Scania trucks. Source: Companies I

Sports car maker Porsche will soon become part of VW’S growing portfolio of brands, joining the VW core marque, Audi, Skoda, Seat, Lamborghini, Bentley and Bugatti. VW has created the new post of head of group marketing communications to tie together the communication message for all the company’s brands. VW has recruited Giovanni Perosino from Fiat for the position. Perosino did the same job at the multi-brand Italian automaker. VW has made Karl-Thomas Neumann, former CEO of parts supplier Continental, head of operations in China, VW’s biggest single market. He has been tasked with expanding the dealer network in China and doubling

The recruitment campaign is not likely to stop anytime soon. According to VW insiders, Winterkorn and Piech have identified 40 senior posts they want headhunters to fill as part of the group’s global-expansion strategy. Will the strategy work? European automotive analysts who follow VW closely are surprisingly positive. Credit Suisse automotive analyst Arnt Ellinghorst said VW is adding a structure that will leverage its vast size. He doesn’t agree with critics who believe VW is making the same mistake as GM, which became unwieldy because of its super size and vast array of brands. “Internal competition isn’t a bad thing. It makes the company fitter and keeps buyers within the group instead of going to rivals,” Ellinghorst said. Nor is VW’s rapid volume growth bad. “VW isn’t inflating its sales,” Ellinghorst said. German academic Stefan Bratzel, who heads the Center of Automotive Technology at the University of Applied Sciences in Bergish Gladbach, said there’s a risk that the premium Porsche and Audi brands will overlap each other and that the lowcost Skoda will continue to gain sales at VW brand’s expense. And VW is heavily reliant on China, which could become a problem if Chinese sales stagnate. “GM never succeeded in managing its brands effectively and Toyota has showed the danger that big growth can create quality issues,” Bratzel said. But he added: “VW has made few mistakes in recent years. It could realize its ambitions.” Max Warburton, head of automotive research at UBS Investment Bank, agreed that VW could become No. 1 – but not before 2018. “If the U.S market quickly grows back to 16 million from 11 million, and with China and Suzuki, VW can do it. But I’m not sure how much money they’ll make doing it.” Paul McVeigh/Luca Ciferri

40
ANE Executive Edition Sept. 22, 2010. Volume 1, Issue 1

Automotive News Europe - September 22, 2010

Table of Contents for the Digital Edition of Automotive News Europe - September 22, 2010