The Truth About Cars » Strategy 2018 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Tue, 29 Jul 2014 17:28:43 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Strategy 2018 Volkswagen Faces Tough Times, Still Plans World Dominance Thu, 25 Apr 2013 11:29:34 +0000

“The coming months will be anything but easy,” Volkswagen CEO Martin Winterkorn told Reuters today at VW’s annual shareholders’ meeting. Nevertheless, he still plans to rule the world.

Except for North America and China, all other regions carry “often significant uncertainty” Winterkorn said. At home in Europe, the market  would be “extremely weak” for the foreseeable future, Volkswagen AG’s Vorstandsvorsitzender predicted.

Yesterday, Volkswagen reported a first-quarter operating profit 26 percent down to a still very respectable $3 billion. Undaunted, Volkswagen wants to match last year’s record earnings of 11.5 billion euros and set new delivery records.

“Regardless of whether we’re in an upturn or downturn, it’s our goal to ensure that VW reaches the top of the automotive industry by 2018,” Winterkorn said. We read that as the Strategie 2018 still being in place. A few months ago, works council chief Bernd Osterloh declared mission accomplished and said the company needs a new strategy.

]]> 8
Volkswagen Chickens Out, Says Strategy 2018 Is Old Hat, Declares Victory, Goes Home Thu, 31 Jan 2013 18:48:45 +0000

In 2007, 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. This morphed into the “Strategie 2018”, which called for world domination no later than what the name says. Today, Volkswagen changed its mind. Declaring an early victory, it wants to move on.

Volkswagen’s top managers already are working on some sort of a Strategie 2022, “as steady volume gains have already propelled the German group within reach of its current sales target for 2018,” says Reuters. Volkswagen’s labor chief Bernd Osterloh agrees: “We definitely need a new growth strategy.” Preferably one that does not include Toyota.

World’s Largest Automakers
Full Year 2012 Data
12M ’12 12M ’11 YoY
Toyota 9,909,440 7,858,091 26.1%
GM 9,288,277 9,023,502 2.9%
Volkswagen 9,070,000 8,160,000 11.2%
Source: Company data.
Toyota: Production. GM: Sales. VW: Deliveries.

Readers of TTAC know (ad nauseam, some will say) that Volkswagen ended the year 2012 with 9.07 million units delivered, putting in in rank three behind Toyota and GM.  Didn’t they want to be the biggest? Now, the target miraculously morphed to 10 million units, a number Toyota missed by a hair last year. This year, the 10 million are in at least theoretical reach of all of the top three. Despite having been given (very long) odds by TTAC to break the 10 million barrier this year, Osterloh thinks it won’t happen, and we think he’s probably right. However, Osterloh says Volkswagen “must consider whether 2018 is still the appropriate standard.”

Interesting. Actually, 10 million never was the goal. The goal was, as related to me by a Volkswagen top executive who was in the meetings, to be better than Toyota, not just in units, but in profitability, innovation, customer satisfaction, everything, no later than 2018. In 2011, the goal looked near: Not Winterkorn, but a giant floodwave had stopped Toyota, half a year later, torrential rains in Thailand drowned Toyota again. Volkswagen wasn’t ready to exploit the situation, instead, GM became #1. Now, Toyota is back, and looking stronger than ever. Meanwhile, Volkswagen is faced with a little trouble at home. I don’t blame Volkswagen for ditching the plan. Actually, I always wondered why Volkswagen would “do what CYA-trained managers usually are loath to do: Set bold and measurable targets.”


]]> 9
Happy Couple: Volkswagen Finally Swallows Porsche Thu, 05 Jul 2012 08:05:53 +0000

They have been together for a while. Behemoth Volkswagen and tiny, but bigger than life Porsche shared technologies and booths at auto shows, Volkswagen generals are in key positions at Porsche. Fitting the German Zeitgeist, they lived together without being formally married. This will be rectified in a few weeks.

On August 1, 2012, the loose knot will be formally tied. Porsche SE will receive around €4.46 billion as consideration for contributing the 50.1 percent of Porsche AG not yet owned by Volkswagen. With that move, Porsche will formally become an integral part of the Volkswagen Group.

What stood in the way of a faster marriage were investment funds that brought suit against the Porsche SE holding company. The solution was to instead buy the sports car business that is handled by Porsche AG. Few outsiders understand the web of Porsche companies and acronyms anyway. However, that brought another problem: Taxes.

Buying Porsche AG normally would be a taxable event to the tune of approximately $2 billion. Volkswagen did not want to pay this kind of money. CFO Hans Dieter Pötsch’s accountants and lawyers went digging and found a passage in Germany’s Umwandlungssteuergesetz (Reorganization Tax Act) and the Umwandlungssteuererlass (Taxation of Reorganizations Circular). Porsche SE received one Volkswagen ordinary share in addition to the €4.46 billion, and voila, the matter was a tax-free reorganization.

According to a Volkswagen statement, “the consolidation of Porsche’s highly profitable automotive business, will have a positive impact on Volkswagen’s consolidated profit.” In this year alone, the company predicts a “clearly positive noncash effect of more than €9 billion in the Volkswagen Group’s financial result.”

Also, Volkswagen can count Porsche’s roughly 100,000 cars sold annually as its. It may not be much, but in the race to Volkswagen’s world domination, planned for 2018, every car counts.

]]> 4
Strategie 2018: Bludgeoned Volkswagen Plans Counter-Attack Mon, 11 Jun 2012 08:20:20 +0000  

A few months ago, Volkswagen’s 2018 goal of world domination was in gripping distance. In a record run, and helped by tsunamis and floods, Volkswagen had finished 2011 as world’s second largest automaker after GM and before Toyota. Overtaking GM was seen as a matter of short time. Six months later, the advantage is slipping away. A visibly rattled Volkswagen now musters all energy to stay in the race.

Volkswagen’s new Hoffnungsträger, freshly-minted China chief Jochem Heizmann, plans to build and sell 4 million cars in China by 2018, he told the German magazine Focus. Last year, Volkswagen sold 2.3 million units in the Middle Kingdom. Heizmann’s conservative predecessor had budgeted 3 million units until 2018. To a delighted board, Heizmann now promises a million more.

Every unit counts in the race to the top. Volkswagen redoubled its efforts to buy U.S. truckmaker Navistar. According to Financial Times Deutschland, Volkswagen is interested in taking over Navistar. Navistar is a bargain, its stock lost half its value in four months. Navistar would round-out Volkswagen’s SCANIA and MAN offerings. MAN already makes engines and components for Navistar. There could be a bidding-war: Fiat is also said to be interested in Navistar. Volkswagen however has the bigger war chest.

Volkswagen will most likely finish the year ranked third. It will have to work hard on not to slip further. Home market Europe, where Volkswagen sells around half of its global volume is a mess. Other markets, or new brands will have to make up for the losses at home if Volkswagen’s Strategie 2018 is supposed to succeed. A reinvigorated Toyota and a disencumbered GM will do everything to keep VW in its third place.

]]> 14
Wunderwaffe Diesel: Porsche Plans All-Out Assault On U.S. Soil Sun, 04 Dec 2011 09:46:18 +0000 Despite still not having been amalgamated into the sprawling Volkswagen empire (blame the lawyers,) Porsche wants to do its share for Volkswagen’s all-out assault to the top. According to Strategie 2018, sorry, make that according to “Mach 18,” the Volkswagen empire wants to be on top in all respects before the decade ends. A small sports car company with barely 100,000 units won’t bring much volume, but they will try as much as they can.  “Porsche aims to double its annual U.S. sales within seven years by dramatically expanding its product lineup — while maintaining its U.S. dealer body at almost the same size,” Automotive News Europe [sub] reports.

Porsche won’t even shy away from the unthinkable – like bringing diesels to America.

“By 2018, we will sell around 50,000 cars in the U.S.,” Detlev von Platen, CEO of Porsche Cars North America, told ANE. That’s double of Porsche’s 25,320 units sold in the United States last year. This year,  v. Platen thinks he will sell “more than 29,000 units” in the U.S.

To support the assault, Porsche will land three new models stateside in 2012:  The redesigned 911 in February, a 430-hp Panamera GTS in spring, and, hold your nose, a Cayenne diesel, planned for the second half of the year.

Don’t laugh. Porsche plans that the oilburning Cayenne will amount to 15 percent of all Cayennes sold in the U.S., and it allots another 15 percent to the Cayenne gasoline-electric hybrid.

In 2013, Porsche will throw a fresh Cajun crossover into the battle.

All of that will be sold through fewer dealers. Platen thinks that his U.S. dealer network, currently counting 200 outlets, will be “slightly consolidating.”

Globally, Porsche wants to double annual sales from 95,000 last year to 200,000 in 2018. It will be a drop in the bucket compared to the more than 10 million of sales the Volkswagen empire will need for word domination, but every drop counts.


]]> 12
Volkswagen’s Strategy 2018. With Generous Support From GM And Toyota Wed, 03 Feb 2010 15:11:57 +0000

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.

]]> 29
Volkswagen Wants To Triple U.S. Sales By 2018 Mon, 11 Jan 2010 11:08:12 +0000 In your dreams. Picture courtesy

Volkswagen has grand plans for the U.S.A. Volkswagen wants to “increase sales and market share in 2010.” Ok, who doesn’t.  Now, for the delusions of grandeur part: By 2018, Volkswagen wants to more than triple annual car sales in the U.S. to 1 million a year, with  Audi accounting for 200,000 sales, reports the Wall Street Journal. Seen any flying pigs lately?

Why 2018? By 2018, Volkswagen wants to rule the world, and trounce Toyota in unit sales, profitability, customer satisfaction, innovation, and most likely size and quantity of cup-holders also.

Everybody in the company has to do his or her share for the grand plan.

Volkswagen Group China already made a huge contribution. More than 1.4m vehicles were delivered to Chinese customers in 2009, an increase of 36.7 percent from 2008. “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,” said Winfried Vahland, President of Volkswagen Group China.

Jacoby doesn’t have numbers like that, but he has tall predictions.

Jacoby prognosticated that Volkswagen will be profitable in the U.S. in 2013 , when annual sales will be between 450,000 and 400,000 vehicles.

In 2009, VWoA sold 297,537 vehicles in the U.S., down slightly from 313,581 the year before. Considering the bloodletting of other brands, this was a heroic effort. Market share rose to 2.9 percent from 2.4 percent the year before. (If you go back to the WSJ article, you will see different numbers. The WSJ only counts Volkswagen brand sales and forgot about Audi.)

According to the WSJ, “growth in the fiercely competitive U.S. market is crucial for Volkswagen’s long-term expansion plan in coming years.”  We beg to differ.

Volkswagen’s lackluster performance in the USA (the highest group sales in the last 10 years  were 424,496 units in 2001, and it was steadily downhill from there) cushioned VW from the debilitating effects of the American carmageddon. Toyota on the other hand was hit hard. ToMoCo’s sales dropped to 1,770,147 in 2009  from 2,217,660 in the year before, down a painful 21 percent.

For all of 2009, Volkswagen had been feted as second largest manufacturer in the world. Last November, it was reported that Volkswagen had already passed by Toyota. Toyota demanded a recount, and nosed ahead of VW. We’ll see what OICA will have to say when they release the official 2009 tally.

Depending on how creative everybody gets with their bookkeeping, VW already could be king of the unit hill.  They bought 20 percent of Suzuki, and with Suzuki ‘s 2.36m units a year added to VW’s more than 6.2m units, Toyota would be toast by a wide margin.

Unfair? More than a million of the 1.83m Chinese GMs sold in 2009 have been made by the SAIC-GM-Wuling joint venture that specializes in cheap trucks and vans, popular in China’s countryside. GM holds a 34 percent stake in the joint venture, but counts 100 percent of the sales as theirs.

]]> 38