Volkswagen's Strategy 2018. With Generous Support From GM And Toyota
When Martin Winterkorn took over as CEO of Volkswagen, he said that Volkswagen wants to be better than Toyota, not just in units, but in profitability, innovation, customer satisfaction, everything. Toyota was the declared enemy of VW. Toyota was bigger, made more money, had happier customers. When Winterkorn declared the lofty goal, it was shrugged off. Incoming CEOs routinely make grand announcements which nobody really takes seriously. The year was 2007, Volkswagen had just become #3 in the world. Toyota was leading VW by more than 2m units sold worldwide. Towering above all was GM, with 9.3m units sold, 800,000 more than Toyota.
A little after the quote above, first rumors about a “Strategy 2018” surfaced. The plan wasn’t public. I knew someone at VW who had seen (but wasn’t given) the strategy, and he confirmed that it said that Volkswagen wanted to overwhelm Toyota – in 10 years. Insiders (this reporter included) rolled their eyes and denounced the plan as the usual hubris of an incoming CEO, a suit who’d be busy collecting his pension by the time 2018 rolled around. I was wrong.
According to an old in-house rule in Wolfsburg, grand announcements from the top are to be ignored for at least a year, because they are usually followed by new and different ones. “When they keep repeating the goal after a year or two, then it’s time to listen,” was the wisdom imparted on me when I did a lot of time in Wolfsburg.
In early 2009, even the unions begun to listen. “All at Volkswagen agree that the targets of Strategy 2018 haven’t changed and that we will reach them,” said workers council chief Bernd Osterloh.
Then, the auto world as we knew it collapsed. GM went under and re-emerged, smaller. Toyota became number 1, followed by Volkswagen. Volkswagen had the luck of, for a change, having not been in the wrong places at the wrong time: Weak in the USA, they were spared heavy losses. Strong in places like Brazil and China, where VW had invested a long, long time ago, VW profited from the growth in these markets. At home, their former nemesis Opel went through bouts of automutilation.
And the “Strategy 2018” became dogma in Wolfsburg. In early January 2010, Winfried Vahland, President of Volkswagen Group China, reported that “based on our excellent performance in 2009, we are confident about achieving our objective of doubling the sales to two million vehicles, laid down in our Strategy 2018, much earlier than planned.” He received a pat on his shoulder, was relieved from his post in China and put in charge of Skoda. At Volkswagen, that counts as a promotion.
A few days later, Volkswagen’s U.S. chief Stefan Jacoby announced that by 2018, Volkswagen wants to more than triple annual car sales in the U.S. to 1 million a year. TTAC illustrated the report with flying pigs.
Through a combination of perseverance and dumb luck, VW may actually be closer to their strategic goal than people imagine. Who (Farrago excluded) would have thunk in 2007 that GM would go bankrupt? Who would have believed that Toyota would be in the grips of one quality scandal after the other?
Suddenly Volkswagen is getting uncharacteristically gutsy. The general weakness of Toyota, the overall good sales in 2009 (Volkswagen sold 1.1 percent more cars in 2009 than in 2008, while the competition looked at double digit losses,) pedal-gate, good sales at the home front (in January, the VW brand gained 10 percent in Germany while the market dropped 4.3 percent,) 40 percent plus in the U.S. in January, all that may have emboldened Volkswagen to do what CYA-trained managers usually are loath to do: Set bold and measurable targets.
According to Automobilwoche [sub,] Volkswagen has put the vague Strategy 2018 in hard numbers. By 2018, Volkswagen wants to sell more than 10m cars. In 2009, they sold 6.29m. By 2018, they want to reach a group pretax margin of more than 8 percent of sales. Paid-in capital is supposed to bring in a profit of 16 percent. “The Volkswagen Group is seeking global economic and environmental leadership in the automotive industry by 2018,” Volkswagen said in an announcement.
A Paris-based analyst interviewed by Reuters is not convinced: “I’m not sure if there’s much point in a carmaker fixing objectives for 2018,” he said.
Well, at the moment, Toyota is actively, albeit unwillingly assisting VW in reaching its lofty goals. Supposedly, Toyota never wanted to be number one, because as the leader, you are the target of everyone behind you. Volkswagen doesn’t share these worries. Yet.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Holy Cow, the VW service centers will clean up. I'm going in for tech training ASAP, there is no way they have enough people to handle the service required to keep that many VW rolling
I've owned more VW/Audi than any brand. I'd say that on average the Japanese cars were usually more trouble free (but not always) and usually relatively cheaper to service. But I never enjoyed owning any Japanese car. Obviously I am in the minority. I think most people want to like VW. But the brand has a reputation for being too expensive and less than trouble free. It has not been my experience, but many also say the dealer experience is poor. If VW is serious they must address these items. Perception is everything. For instance, I doubt there is much to the Toyota story, but perception will ruin them if they are not careful. That being said, I was driving home yesterday in my Passat while listening to a Toyota news story on the radio. At 50 mph (alone on the road) I kept my foot on the accelerator and hit the brake hard. The wire on the throttle cut while the anti-lock brakes activated, immediately stopping the car. Then, I was not unhappy I bought the Passat.