By on May 13, 2010

Whenever TTAC took GM to task for branding run amok and excessive platform sharing, the example of Volkswagen has always been the key counterfactual. With seven brands available in Europe, the Volkswagen-Audi group is the continental GM, always looking for another way to repackage a pedestrian FWD platform. The only difference is that VW has actually been growing.  But Wolfsburg’s brand profligacy is starting to bear some GM-style bitter fruit. Skoda has been surprisingly strong of late, actually making problems for the Volkswagen brand in certain markets. Seat, on the other hand, is not doing so well. With only one factory, at Martorell, near Barcelona, Seat has always been a slightly niche player, offering older VW designs with some Pontiac-style “emotional” styling flair and a sportier image. The problem now, as Seat CEO James Muir tells The WSJ [sub], is that

The brand really is too small for this plant

Running at only 60 percent of its 500,000 unit capacity, Seat is too small for its lone plant. As a result, VW is launching a last-ditch effort to save its dying brand.

And make no mistake, the rescue of Seat is a last-chance effort. Muir explains

I think this is the last attempt for the brand. It wouldn’t make sense to think something else. If one would want to get rid of Seat, one would have to give the other party money to take it.

Seat lost about $430m last year, as sales dropped eight percent to 337,000 units, according to BusinessWeek. So, what’s the problem? The European market is projected to contract this year, and Seat isn’t just VW’s weakest brand… it’s one of the weakest brands in Europe. Sales in Seat’s main market, Spain, fell 21 percent last year, and the other Southern European markets where Seat is popular haven’t fared well lately either. And outside of being a Volkswagen for those vulnerable Mediterranean markets, it’s not clear what Seat is supposed to mean to anyone else. Mike Tyndall, an automotive analyst at Nomura Securities in London, explains

It seems to me that VW hasn’t fully committed itself yet to the brand image of Seat. At some point they wanted Seat to be the sporty brand within the VW family, but some of the model decisions don’t add up

So what’s the plan to rescue this weakened and increasingly irrelevant brand? According to CEO Muir

Our clear focus over the next three years will be to improve utilization. One cannot solely rely on cost reductions to make Seat profitable

That means building the Audi Q3 compact crossover in Martorell, and boosting sales of Seat’s Golf-based Leon from 75k units to 200k units by adding more variants. Currently at nine models, Seat plans on increasing its number of nameplates to 40 by 2018. More fleet business is also in the cards.

And though overcapacity of the kind that’s bringing down Seat is a distinctively European problem, the brand’s troubles are more than a little reminiscent of Pontiacs. Skoda competes with Seat in the budget-VW category, and does so consistently better across Europe. Seat is supposed to be the “sporty Volkswagen” brand, but it must compete with GTIs and Skoda RS models. And despite struggling with geographic limitations to its appeal, VW thinks it can solve the brands problems by boosting volume and nameplates. As we all know by now, taking a sporty brand into the mass-market with more models and more fleet sales is a classic technique for destroying its last vestiges of authentic appeal. Just ask the Pontiac G6. Keeping Seat alive is just another step for Volkswagen down the path towards General Motors-dom.

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12 Comments on “VW Giving “Spanish Pontiac” One Last Chance...”


  • avatar
    panzerfaust

    Going from nine models to Forty? And we all thought Fiat would spell the end of Seat.

  • avatar
    hreardon

    When I lived in Spain about ten years ago there were some great SEATs, especially the Leon, which was a pretty slick piece of kit.

    Great rental cars when I needed them, but I couldn’t ever see picking one up over a comparable GTI or Golf.

  • avatar

    @ panzerfaust +1. Geez, is each exterior color going to constitute a “model?”

  • avatar
    George B

    Maybe just kill off the Seat brand and get Shakira to sell Volkswagens?

    http://www.youtube.com/watch?v=BtQZmDHI-MM
    http://www.youtube.com/watch?v=Nd9rnyAVcXY&feature=related

    Would be easy to exchange the forgettable Seat cars with equally forgettable volkswagens in the ads above.

  • avatar

    “VW hasn’t fully committed itself yet to the brand image of Seat”?

    How? There simply is no brand image. Seat has built cheap Fiats for the Spanish market to avoid the then excessive tolls on import cars and generate workplaces. That was a rather limited business model, similar to that of Steyr Daimler Puch in Austria.

    VW should have bought the rights on the Hispano Suiza brand instead. At least, this was a brand and not an under-utilized factory as Seat.

    BTW: I’m also puzzled that the VW business model still seems to work, as compared to that of GM. But let’s wait until Piëch dies. My prediction: a bunch of corporate dimwits will get into the driver seat and very soon will find out that they can’t drive.

  • avatar
    Dr Strangelove

    When Volkswagen bought Seat, it looked like a reasonable decision. The iron curtain was still in place, and nobody expected that to change anytime soon.

    Then, a few years later the iron curtain opened up, and the rules of the game changed completely. VW was quick on its feet to acquire Skoda, and again there was a good business case. There now was one brand too many, but it wasn’t really anybody’s fault. This isn’t a tale of inept management.

  • avatar
    Ingvar

    It’s true that VW never knew what to do with Seat. Obviously, when the VW brand went upmarket, there was a need for a brand of cheaper cars underneath. And that was Seat. Then came Skoda. Then they had both. Then they tried to market Seat as Alfa Romeo. Then they lost touch, and tried to make a Lancia out of it instead. Seat is to Volkswagen what Saab was to GM, they simply never had a clue, they never knew what to make of it, and they never understood either the market segment or the demographic.

  • avatar

    You can’t make a brand out of nothing, even a cheap one. Seat as the new Alfa Romeo? Alfa Romeo was a burnt brand even then and still is, IMHO. Everybody who wanted an Alfa already had one, was disappointed and would never get one again.
    Seat as a brand is dead because it never really was alive. That’s different from Skoda and that may be the reason why Skoda won in this VW-internal game.
    I wouldn’t know what to do with Seat either, except dropping it.

  • avatar
    Uncle Mellow

    The problem is that the current Altea , Toledo , and Leon all look the same , and none of them look good. The latest Ibiza is nice , and the new Exeo (facelifted old A4) is attractive , but the rest of the range was saddled with odd styling. They never really had a sporting image, and do not offer any coupes.

    • 0 avatar
      Ingvar

      A warmed over previous gen Audi A4 for ten percent off? I guess there’s a market for that too, but call me skeptic. Brand cachet?

      The problem with playing the being odd and different card, is that Seat isn’t different enough. You can’t play weird for the sake of weirdness, that’s playing the clown. It’s shallow and people see through that. Seat is no Saab or Subaru or Citroen. When people see a Seat, they say, “Well, that’s different, but why? And why would I want one?” They are simply not different enough to make a difference.

  • avatar
    Buckshot

    Seat has some attractive models, on the outside.
    The interiors on the other hand are depressing.
    It is a plain, cheap and ugly looking place.
    To get it more “sporty”, the gearing is lower than VWs.

  • avatar
    Galne Gunnar

    I think the Altea and Leon look just fine! Should we discuss matters of taste? (No.)

    Seat could have just the right sporting image, if they made them drive like Peugeots used to (205, 206, 306, 406… ), for example.


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