By on February 3, 2010

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 #2, 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.

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29 Comments on “Volkswagen’s Strategy 2018. With Generous Support From GM And Toyota...”


  • avatar
    educatordan

    Schlieffen’s dying words: “Remember to keep the right flank strong.” His advice was ignored. But the man did look good in his uniform: http://en.wikipedia.org/wiki/File:Alfred_Graf_von_Schliefen.jpg kinda looks like my maternal grandfather.

    “Get your real and perceived quality improved in the public’s mind, keep your cars sporty and European, and someday you may rule the world!” – that would be my words to VW.

    BTW I love strategy games. Once played old “Civilization III” as the Germans during WWII, got the Russians to surrender, poured boat loads of tax money into R&D and had nuclear weapons and stealth bombers by 1943. Needless to say, I won. I don’t recall if there was a WWI sim as one of the scenarios.

  • avatar
    Mr Carpenter

    Everyone laughed at the CEO of Hyundai a few years ago when he said he wanted to have quality improved and get up to #5 from #7 or #8 in worldwide sales.

    Nobody’s laughing any more.

    Likewise when the CEO of Hyundai stated that the upcoming Hyundai Sonata Hybrid would be a far better car than the Prius. While that remains to be seen, I suspect he wasn’t BS’ing there, either.

    I sure like the looks of the new Sonata.

    But I suspect that in 10 years when I replace my current Sonata and Legacy (both new), I’ll be looking at the prior 5 years’ history in Consumer Reports before I even bother setting foot in a VW dealership to buy “my retirement car”.

  • avatar
    tedward

    I love VW’s and yet they simply will not make US headway without a cheaper Jetta (and NO 5 cylinder engines) and a 10 year warranty. It sounds like the cheap Jetta is coming, but the warranty is never going to happen.

    • 0 avatar
      crc

      tedward, I agree one of the things VW needs is a longer warranty. However, I would not subject myself to 10 years of returning to the VW service department.

    • 0 avatar
      hreardon

      I tend to agree with the warranty thing – if Volkswagen is serious about jumpstarting sales in the United States, offer a significantly better warranty than the 3/36 and scheduled maintenance.

      It doesn’t even need to be a 10/100 warranty, but if Volkswagen were to offer a 4/50 or 5/60 and Audi to offer a 5/60 it may have a significant impact on sales. There are a significant enough number of people who get bored of cars after 3 – 4 years and want something newer-faster-better that I think the turnover would not take a serious hit.

    • 0 avatar

      A cheaper Jetta is a dicey proposition. The appeal of the Jetta is that it offers German engineering and German driving dynamics at an affordable price. And in traditional German fashion the Jetta is over-engineered and unnecessarliy complex. Lowering the Jetta’s price point will mean simplifying and decontenting which could compromise the car’s German character.

      In recent years I have owned a 2003 Jetta GLS and a 2006 Jetta TDI. In my experience Volkswagen’s actual quality is much better than its reputation suggests. In terms of quality and reliability these Volkswagens were much better cars than the two Chevrolets I had previously owned. I would buy another VW. I will never buy another Chevrolet.

      In my opinion VW’s greatest weakness is the long-term ownership and maintenance costs. Because of how these cars are designed and made they are difficult and expensive to service. This is one area that could be improved by the aforementioned simplification and decontenting. The trick is to lower costs without sacrificing what makes the Jetta a VW.

    • 0 avatar
      Geotpf

      Quality and reliability are different things, IMHO. That is, I think VW products are high quality but poor reliability. Or, to put it another way, they are great when they work but frequently don’t, um, work. Toyota’s recent recalls do nothing to change the data that shows they have high reliability, although they might change public perception of such.

    • 0 avatar

      @ Geotpf – I’m not sure I follow you here. In my book quality and reliability are synonymous. A quality car is a reliable car and an unreliable car is not a quality car. When I say my Jettas were quality cars I mean they were well made (quality) and they were trouble free (reliable).

      Of course I never abused my cars and I did all of the scheduled maintenance. VW attracts a lot of young buyers who drive very agressively, and considering the price of VW parts and service I would not be surprised if a lot of Volkswagens suffer from defered maintanance.

    • 0 avatar
      geozinger

      I’m guessing no one remembers the early 90′s and the 10 yr/100K mile warranty that VW had back then. Apparently it was their strategy to remain relevant in the US as their sales took a nose dive in the late 80′s early 90′s. It seemed to have worked, as VW is still here.

      Two things VW needs: The Polo or the Brazilian Gol or a car like it, something that is the same size as the original Golf/Rabbit from the 1970′s (that was featured here on this site before the Toyotathon ate our world). A friend of mine had a VW Fox (not the Audi) back in the day, and for a first car, it was great. She’d like to have another one. I could see my teenage daughters driving something similar too.

      Also, something like the small pickups sold in Brazil, like the Saviero (sp?). Even my old favorites the Dodge Durango and the Chevy Colorado too, now are both too huge. The Ranger is just ancient, but probably OK. But something like the Saviero would be great for the occasional handyman like myself. The Anorak would be great here, too, but I think it would get eaten alive by the domestics when pricing becomes the issue.

  • avatar
    hreardon

    While I usually find these 5 and 10 year plans to be somewhat laughable, I’m willing to give Volkswagen a bit of a pass on this one and admit that they’ve got a good chance of achieving these goals.

    The past two years has seen the Volkswagen Group really start to get its shit together, especially here in North America with VW and Audi. Audi has matured and is poised for continued organic growth and Volkswagen has begun to bring in sought after product like the 2010 GTI, Tiguan and CC. I have a feeling that if the next generation Jetta previewed at Detroit comes to production similar to what we saw they will be able to add another solid product to the portfolio.

    They also appear to have gotten a lot of their most vexing quality issues under control – perhaps Karesh can provide some more input on that front? Audi in particular seems to have really turned the corner in quality since the 2007 model year.

    So, while the plan sounds like typical executive hyperbole, Volkswagen at least is presenting the image of a company that can successfully execute this strategy. Perhaps they’ve been a bit humbled by serious missteps in North America over the last ten years and more cautious after studying GM and Toyota more recently.

  • avatar
    Dr Strangelove

    Whether or not they will ultimately succeed with this, Winterkorn is the best CEO at VW in a long, long time – whereas Schrempp was probably the all-time low for Daimler.

  • avatar
    WaftableTorque

    I personally have a hate-on for VW, it’s easy for me to dislike such a hubris-filled company. Sure it’s supposed to be product-product-product, but some corporations just rub you the wrong way. It just means that I won’t be cross shopping Audi/Bentley/Bugatti/Lamborghini/Porsche/Suzuki/VW and whomever else they try to absorb.

    • 0 avatar

      Hubris may be VW’s undoing because too much pride leads to a sense of infalibility, entitlement and carelesness. GM rode its hubris all the way to bankruptcy and the old GM hubris is still there today. Toyota’s hubris has led to its present p.r. and legal nightmare. Porsche’s hubris led to its absorbtion by VW. Daimler’s hubris led to the Daimler-Chrysler fiasco.

    • 0 avatar
      Robert.Walter

      Joe: Couldn’t have said it better myself.

    • 0 avatar
      th009

      But is Winterkorn’s (and VW’s) goal actually hubris? Or simply ambition?

      There is nothing wrong with ambition in my books, as long as the person or company in question recognizes the challenges and obstacles in the way of achieving those goals.

    • 0 avatar
      Robert.Walter

      That’s one fo the key challenges for Winterkorn and his team! Risk is that if there is success in the mid-term, and a sustainable culture is not in place, the progenitors will leave and their hunger and ambition will be replaced by satisfaction and hubris …

      It is an old story, the ones who inherit it don’t often know what it took to get it to the point of success and worse, don’t know how to maintain or grow it.

  • avatar
    jkross22

    VW’s Carefree Maintenance plan is a bit confusing. Nowhere on their website does it say that oil changes are included and it specifically excludes brakes, tires, wiper blades, bulbs, etc. from the plan. It does say that AdBlue is included, though, on their TDI models.

    It appears the plan is all about getting the car checked out for no charge.

    Someone tell me if I missed something.

  • avatar
    jkross22

    @ Joe McKinney,

    I’ve heard that VW’s are overly complex, but I’ve not heard anyone articulate examples of how this is so. I’ve popped the hood on several and I don’t see anything overly complex about them.

    Any examples?

    • 0 avatar
      dswilly

      How about this one. A co-worker has a 2003 Passat. Dealer has to change the battery due to re-coding. If you do it yourself the car won’t start. Let alone the dang thing is buried in the fender or something like that. I think its like $300 service.

    • 0 avatar

      Another example is the timing belt on the Jetta, Golf and New Beetle. One of the motor mounts is bolted to the engine through the loop of the belt. To replace the timing belt the engine has to be supported with a hoist so this motor mount can be removed. This job will cost $500+ at an indepedent shop and upwards of $1,000 at a VW dealer. This same proceedure applies to the auxiliary drive belt which is usually replaced at the same time as the timing belt. It would be much easier and cheaper to replace these belts if they were not looped around this motor mount.

      A third example- If your VW is equipped with the DSG transmission the 40K service will run around $350. Apparantly this job is time and labor intensive because the transmission fluid has to be drained out through a very thin tube. It would be much faster and cheaper to service the DSG if it had an old fashioned drain plug on the bottom of the transmission case.

    • 0 avatar

      There used to be a department at Volkswagen Customer Service that checked new car developments for “serviceability” to avoid cases such as the above. This also helped lower insurance costs, because easier service – less time spent in shop – lower repair bills.

      If I recall right, this department was scrapped during Winterkorn’s time as head of “Technical Development” – the guys bugged his engineers too much.

  • avatar
    Robert.Walter

    Grand plans are not all made the same, we look at this from a snap-shot in time.

    18 years is a long time … in Aug. 1914, v.S.’s grand plan, had been thought deliverable in a year, two at most. Almost from the first, external events mounted (highpoint being the 1917 arrival of Pershing and the Marines) then the internal events (social turmoil w/in Germany, Kaiser doing a runner) and by Nov. 1918, it was all over (or not), and the plan had been long dead.

    Like any good opportunist, VW should make hay while the sun shines on them, because once the other big-boys recoup, regroup and reenergize, as well as the new entries (Koreans, Chinese, Indians, Spyker-SAAB) make their beachhead and start to move inland, the external events will gut and lay WOB’s plan to rest by Nov. 1918.

    Or put simply, it’s like comparing:

    “Let the last man on the right brush the Channel with his sleeve.”

    with

    “And me, I’m flying in my taxi, taking tips, and getting stoned.”

  • avatar
    TCragg

    I have been a lifetime VW owner, having purchased about 15 of their products over the past two decades. VW’s biggest issue (and biggest obstacle to achieving their North American sales targets) is spotty reliabilty and hit and miss dealership experiences. While my local VW dealer has always treated me well, I have had personal horror stories when dealing with other stores. BTW, in Canada, VW’s standard warranty is 4 years/80,000 km bumper to bumper. While not as good as say, Kia, it’s better than that offered in the USA.

    People ask me why I keep purchasing VWs. My answer is the driving experience, the culture (much like BMW motorcycles, of which I’m also an owner), and the relative rarity of the cars compared to their Honmaztoyundaissan competitors. By dumbing-down the Europeaness and cheapening their North American product in a drive to increase sales, VW may well alienate their core market, but perhaps it’s a market they think they can sacrifice to appeal to the masses. I owned a Westmoreland Rabbit. Worst VW I’ve ever owned. I hope VW has learned their lesson and does not try to make another Malibu in Chattanooga.

  • avatar
    dswilly

    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

  • avatar
    mpresley

    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.


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