This week, the idea of Brazil’s cars being “unsafe” due to inferior construction has been gaining a lot of currency on the blogosphere after the Associated Press published a report on this topic. Very few outlets have anyone posted in Brazil to do any deeper digging, but TTAC does. Unfortunately, our man Marcelo de Vasconcellos is currently in exams right now (good luck, Senhor!) and was unable to write up an article refuting these claims. Still, Marcelo took the time out to talk to TTAC about the problems behind the article.

The various articles floating around the web allege that Brazilian cars are doomed to be “unsafe” due to poor workmanship, excessive cost-cutting and poor grades of steel. Marcelo was able to speak to people at Fiat Brazil, as well as some engineering professors, and found out that the truth is that road fatalities are up, but not for the reasons people think they are.

A report by the Associated Press cites electricty savings on welding and shoddy workmanship as a key culprit behind the poor crash safety of Brazil’s cars

“If you save on electricity, you save on cost. One way to save electricity is either reducing the number of spot welds or using less energy for each spot weld made. This affects structural performance in the event of a crash.”

Marcelo asserts that since most of the cars sold in Brazil are unibody subcompacts, this argument holds little weight. Welds are done via robot, and the process is highly standardized, with little variation. Furthermore, many Brazilian made cars are exported. Fiats are sent back to Italy, while Volkswagens are exported to Argentina, the Middle East, Russia and other locations. Any cars sold in Europe must meet strict Euro NCAP standards, and the European magazines publish the results in great detail.

Brazilian steel is also blamed due to its apparently poor quality. Marcelo asserts this is false as well. Brazil’s iron ore is a sought after commodity on the world market as well (especially in places like Australia and Brazil), and Brazil is home to ValeInco, one of the world’s leading steel producers. This is far from the Eastern European sheetmetal that was notorious for causing Fiats to rust within minutes of coming into contact with road salt. We are dealing with a globally marketed commodity that must be competitive.

Marcelo instead places the blame on the increasing number of cars on the road, piloted by first-time drivers on poorly maintained road infastructure

The professor [Marcelo's friend who is an engineering professor] also commented that while the article showed an increase of 70% in fatalities (I think that’s what the article said, I have not read it) it did not say that the market has grown more than 150% over the last 15 years. Many, many of these buyers are first time drivers. Due to credit, many people don’t have the money to buy a used car (still more expensive here than in America) but they do have credit to buy said car in 60 months.

So, first time buyer, many times the first car in the family, many times young people, a disaster is waiting to happen. The other ingredient is of course the government. Badly maintained roads, almost no police presence on streets – an over-reliance on radars, just recently a crack down on drunk driving (the limit in Brazil is now 0, yes zero), lack of signs, roads designed and engineered and built in the 60s. Plus traffic conditions lots and lots of very old, decrepit really, buses and trucks…

Of course small cars are involved in more accidents. 70% of the market in Brazil is Palio, Uno, Gol, Fox, Celta, Classic, Sandero, Logan, 208, Ka, Fiesta and derivatives. All considered subcompacts in America. Of course they are in the majority of accidents. Of course most people get killed or maimed in them. A Gol sells 30k a month, a Corolla is lucky to get 3k…

As far as crash testing goes, Marcelo admits that Brazil does have a long way to go with both crash testing standards and mandatory safety features, but notes that the country is improving.

For you to have an idea, a Renault Sandero recently crash tested did better than a Chinese JAC 3. Detail: the Sandero was not equipped with airbags or ABS and the JAC was. Brazilian built Corollas got the same results as American Corollas. Now, airbags and ABS become mandatory next year. Look for Brazilian cars to then get the same results as their first world brethren. Take an American Fusion, strip it of its airbags and it’ll get the same 1, 2 or 3 stars Brazilian cars have been getting in such tests.

Brazilian cars are sort of middle of the road. They are not deathtraps but they are not first world because they don’t have lots of active safety systems. But they do have a lot of passive systems, collapsible steering wheel columns, collapsible brake peddles, fuel cut off systems in case of accidents, crumple zones, 3 point seat belts, they are all there.

While it would be irresponsible to ignore the AP’s report out of hand, it’s worth highlighting some of the non-car related factors in Marcelo’s interview. The lack of any drunk driving regulations, the substantial amount of inexperienced drivers on poorly maintained roads with scant traffic laws and the lack of any real enforcement of the rules of the road is clearly a recipe for disaster. Whether these locally-built subcompacts are in fact death traps is another debate that I’m not comfortable wading into.

One point that nobody has raised yet is the obscene prices that Brazilian consumers pay for cars. Often times they are 2-3 times more expensive than in America. Brazilian consumers could potentially be driving inferior cars and paying through the nose for them.

The Volkswagen CrossBlue and CrossBlue Coupe will be made in China by the Shanghai-Volkswagen joint venture, Carnewschina reports today.  According to the report, the car will be built when Volkswagen’s new factory will open in Changsha in China’s Hunan Province.

The plant will have an annual output of 300,000 units, construction of the plant started yesterday.

The CrossBlue Coupe with (according to Autoweek)  “sporty looks and proportions—and eye-popping 415-hp output” and the more traditional CrossBlue were concepts shown at this year’s Shanghai Auto Show. The concept uses a 295-hp, V6 TSI engine, augmented by two electric motors that add 54 hp and 114 hp, for a net total output of 415 hp for the system.

Volkswagen  says then “when the car’s full power potential is utilized, the SUV becomes a sports car: The Volkswagen accelerates to 100 km/h in a mere 5.9 seconds, and its maximum speed is 236 km/h (147 mph).” Volkswagen claims a combined fuel consumption of just 3.0 l/100 km (in the new European driving cycle or NEDC, 78 mpg , definitely not EPA).

Whether this power train will still be in the car when it goes on sale remains to be seen. A seven-seat and a five-seat variant is planned. The production version will be based on Volkswagen’s new MQB platform.

According to Carnewschina, “The CrossBlue is developed to satisfy China’s ever growing appetite for bigger, faster and more luxurious SUV’s. The CrossBlue Concept is basically the successor of the current Volkswagen Touareg, the Crossblue is moving into new territory for the Volkswagen brand.”

According to Chinese rumors, the new Changsha factory will also build a new Volkswagen sedan, code named VW511, that will be positioned between the Volkswagen Passat and the Volkswagen Phaeton.

After plans failed to sue Porsche in America, where juries are impressionable and awards are rich, the lawsuits are now in Germany, where courts are cautious, and where professional judges need to be convinced. The wheels of justice crank slowly.

“We are optimistic regarding the outcome of the proceedings,” Martin Winterkorn,  CEO of Porsche SE and Volkswagen, told Reuters at the holding company’s annual general meeting. According to the wire service, “planned hearings of three lawsuits pushing over 4 billion euros of damages stalled at a German court on April 17 after the presiding judge said a court specializing on cartel matters may need to be commissioned to handle the main 2 billion-euro case.Two other lawsuits were postponed until Oct. 30 after the lawyer for the plaintiffs fell ill. That day, three more cases are due to be heard at the court in the northern German city of Braunschweig.”

Plaintiffs say that Porsche SE lied about its plans to take over Volkswagen. Trusting claims that Porsche is not interested, hedge fonds and private investors shorted the stock. When it became known that Porsche SE controlled 42.6 percent of VW’s common shares and held options for another 31.5 percent of the stock, a giant short trap opened and the Volkswagen share soared to of 1,000 Euro as investors frantically bought the stock they had borrowed

Eventually, Porsche became a victim of the credit crunch, the leveraged buyout failed, and Volkswagen took over Porsche.

“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.

The pendulum swings to the U.S.: As expected, Ford turned in higher-than-expected first-quarter profits today, while in Germany, Daimler’s formerly pornographic profits were slashed in half, and Volkswagen stubbornly maintained its outlook despite declining profits.

Ford’s North American unit posted its best quarter in more than a decade on the strength of new models, Reuters says. Revenue in North America shot up by one-fifth during the quarter. Ford reported a pretax profit of $2.1 billion, or 41 cents per share for the quarter, down from about $2.3 billion a year earlier, but better than analysts expected. Ford says it expects to lose $2 billion in Europe this year.

Meanwhile in Germany, Daimler ditched its earnings forecast after its first-quarter profit plunged more than half, brought on by a protracted slump Europe and problems in China, Reuters says.

In Wolfsburg, Volkswagen’s first quarter earnings declined to 2.34 billion euros ($3.05 billion) from 3.16 billion a year ago. VW is bracing for “increasingly stiff competition in a challenging market environment,” Reuters reports. Nevertheless, Volkswagen sees no reason to change its goals to match last year’s record operating profit of 11.5 billion euros and to push global deliveries to new record levels.

Toyota released global production numbers for the first quarter of 2013 today, which gives us a chance to officially initiate our 2013 tracking of the World’s Largest Automakers, based on hard data. Having made 2.5 million units in the first three months, Toyota maintains its lead over runner-up GM and third-place Volkswagen, however, the field is tight.

In the first quarter, Toyota is 154,000 units ahead of GM, only 91,000 units behind GM follows Volkswagen. Toyota had planned for a flat 2013 to digest the large increases in the prior year. Asked why his company is down by seven percent in the first quarter, Tokyo-based Toyota spokesman Dion Corbett said that this is largely a mathematical phenomenon: “In the first quarter of 2012, we were still in the catch-up phase and worked overtime after the natural disasters of 2011.” Indeed, Toyota’s worldwide output in the first quarter of 2012 had jumped 66 percent over the first quarter of 2011, which had only be down 14 percent compared to the prior year. The full impact of the disasters was felt only in the months later.

The on-going troubles of Japanese brands in China affected the Q1 results, but only marginally. Toyota’s first quarter production in China stood at 176,000 units, Corbett says. That is down 17.2 percent. In a tight race like this year’s however, every unit counts.

Overall, Toyota is well positioned to maintain its lead throughout the year, and to end the year as the first automaker to pass the 10 million unit mark. A lot can and does happen throughout the year, and the race is still winnable by all three, with varying degrees of difficulty. Volkswagen is held back by a dismal Europe, however, via Opel, GM has to contend with the same problem, albeit to a lesser numerical degree. Toyota’s exposure in Europe is minor. GM and Volkswagen are neck-on-neck in China, where Toyota will continue to suffer. All three are well established to profit from a growing U.S. market, GM and Toyota more so than VW. Slightly off most RADARs, Toyota will gain most from a surging Southeast Asian market. 2012 total sales in the region (including India) exceeded 9 million, with most indicators pointing up. Toyota’s sales in the region were around 1.5 million. “That’s roughly double of what we sell in China, and in China, we have to share,” quipped a Toyota executive a while ago.

Looking a bit like a hybrid between the Range Rover Evoque and a Subaru Outback, the VW CrossBlue Coupe Concept is the smaller companion to the larger CrossBlue that debuted at Detroit. The Coupe has a twin-turbo V6 and a plug-in hybrid system making 409 horsepower, but don’t expect that to make it into production. Hopefully the CrossBlue’s diesel engine does carry over to the production version, which is rumored to be the next Tiguan.

1998 Pontiac Rageous

All good things, even obscure and maybe even not so good, must come to an end. You can see previous installments of the Encyclopedia of Obscure Concept and Show Cars here, here, here, and here.

Oldsmobile, Packard, Plymouth. Another dead brand with obscure concept cars in this part of the alphabet is Pontiac. This is their Rageous concept from 1997, another proto-CUV, and what some have called “the Aztek that should have been”. Imagine a four door Trans Am (the rear doors are suicide style like on the RX-8 Mazda) with  a hatchback and a flat load floor that will accommodate a 4X8 sheet of plywood. A ’90s vintage LT1 and a Corvette based rear suspension completed the package, which of course had Pontiac’s supernumerary nostrils from that era. Actually, the Rageous isn’t that obscure. Mattel’s Hot Wheels released their own version of it in 1999 and reissued it at least 8 times since then. Like the Jeep Jeepster concept, if you’re a Gen Y’er, or a baby boomer who collects Hot Wheels you may actually remember the Pontiac Rageous.

Speak of the devil. Not a bad idea, but much better in theory than in practice.

The name Banshee has graced a number of sporty Pontiac show cars starting in 1964.  You can see how GM designers were trying to come up with an integrated rear spoiler and this 1988 Banshee did have an influence on the Firebird and Camaro but I think the 4th generation Camaro, which came out in 1993, had an even better integrated spoiler.

In the early 1960s, Pontiac made a couple of Tempest based concepts including the Monte Carlo in 1962, a two seat speedster with cut down glass and fairings on the back deck. I dig the period correct mag wheels secured with a single knock off hub nut.

The following year the Pontiac Tempest went from sporty to elegant with the Fleur de Lis, though if you look at the badge in the grille, it’s got a 326 V8 under the hood. You could argue that the first muscle cars were small Pontiacs with V8 engines.

The Pontiac Piranha, introduced in 2000, had a logo that could be used to make an Angry Fish spinoff. It’s so obscure that it doesn’t even have its own Wikipedia page, though Mattel’s Matchbox brand has issued it four times since 2002 and it’s apparently still in production. Perhaps Mattel sold more Pontiacs in that brand’s last decade than General Motors did.

Like Ford’s Ghia Prima, Pontiac tried the Nissan Pulsar sedan/hatch/wagon idea with the Salsa show cars in 1992: “A highly versatile small sport utility vehicle with a unique expanding body configuration.” Note the surfboards, a recurring show car motif.

Did anyone put a poster of the Pontiac Stinger on their wall?

In 2004, to demonstrate the flexibility of the then new but now abandoned Kappa platform, GM brought out three show cars, the production version of the upcoming 2006 Pontiac Solstice, the Saturn Curve concept and the Chevy Nomad concept. The Curve, a chunky, muscular design that I thought looked kinda funny, never made it to production but Saturn did get the Sky, it’s own version of the Solstice roadster. The Nomad, a modern take on GM’s legendary Corvette station wagon from the 1954 Motorama touring car show, was probably never even considered for production. Saturn and Pontiac are dead, as is the Kappa platform. As far as I can tell, since the Sky, Solstice and Sky-based Opel GT have gone out of production no current GM product is based on Kappa architecture. Of the three show cars in 2004, the Nomad was the most popular. My guess is that had Chevy made that version of the Kappa, the platform might still be alive. Somewhere a shuttered Pontiac-Saturn dealer is having Nate Altmanesque dreams of buying some tooling.

Some of the less obscure show cars of the late 1950s and early 1960s were ideas that seemed perfectly reasonable then but outlandish now, like the two wheeled gyroscope stabilized Ford Gyron. You may have heard of the Gyron, but have you ever seen the Simca Fulgur from Chrysler’s French subsidiary? Fulgar means “lightning” in Latin and I suppose the connection was electricity. The Fulgur was another supposedly gyrostabilized vehicle, with electric power (some references say atomic) and an “electronic brain”.

The 1990 Subaru SRD-1 was the first concept car out of the Subaru Research and Design center in Cypress, California. Recognizing that they were selling the most popular import station wagons, Subaru went with their strengths and designed what they called ”an innovative “dream wagon” concept for the ’90s and beyond”. The “beyond” part was a reference to a “family wagon” with features designed “with characteristic attention to the future needs of the mature wagon users”. The typical Subaru owner then was often rather frugal and I guess for that crowd knowing that the car would still be running after the kids move out and you start buying Depends would be a selling point.

The Suzuki Sea from 2005 and 2006 was one of a number of forgettable Suzuki concepts that embraced surfer culture. You’ll excuse me if I’d prefer a real woody wagon (and definitely not the Dodge Kahuna) if I was going to go surfing.

For a conservative company decried by some as producing “beigemobiles”, Toyota has made some rather odd concepts, like the Pod from 2002.

I’m guessing that like the Subaru SRD-1, Toyota’s CAL-1, from the 1977-78 show circuit, celebrated that Japanese company’s then new California design center, in this case CALTY. Though it was designed in the United States, it was revealed at the 1977 Tokyo show, which may explain the right hand drive. Based on an A40 Celica Supra, the CAL-1 was a ute, with wooden decking over the pickup bed. Also reminiscent of Subaru are the BRAT style seats in the bad.

The Volkswagen AAC, shown here at Chicago in 2000, was another VW pickup truck that they didn’t sell in North America.

Do you remember the Volkswagon ARVW (Aerodynamic Research Volkswagen) from 1980? For a while it was the fastest diesel powered car in the world: 362.07 km/h.

A show car doesn’t have to be old to be obscure. The Volvo Concept You was on the show circuit last year. It’s a gorgeous car and a look at what the next Volvo S80 flagship will be like, but I think even Volvo wants to keep it obscure. They kept it behind glass at the 2012 NAIAS.

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can dig deeper at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks – RJS

Despite a chorus of largely uncritical reporting, there is a growing contingent of those who question VW’s claim that their new MQB modular architecture will bring about significant savings. The latest among them is Bernstein Research. A report by noted analyst Max Warburton (who recently authored the definitive study on Chinese cars) questions VW’s claims and shows how MQB may be helpful, but not nearly as significant as VW claims. On the other hand, it’s worth noting that these reports are meant for end-user investors, not necessarily industry types.

In theory, the MQB platform is a dream come true for any auto manufacturer, allowing a one-size-fits-all platform to span across their expansive product offerings and further increase economies of scale by offering both standardization and flexibility all in one neat package. From that perspective, it’s easy to wonder “how can Volkswagen NOT save money?” And for a company like VW, which is arguably an industry leader in scale, 20 percent might even be an appropriate  figure.

Like any prudent business student, I began to question the numbers being disseminated from the company. 20 percent seemed too neat, too easy, and most of all, too tailor made for a largely unquestioning automotive press. My thoughts trailed back to my introductory finance class. One key consideration that should be taken into mind when analyzing company valuations is the optimism of those responsible for creating the financial models. Naturally, I figured 20% was the result of this phenomenon. If you think about it, it’s tough to imagine, “VW Announces MQB to Save 2% of Costs,” making a splash in the headlines.

Bernstein Research’s analyst report on MQB presents a more contrarian view. Overall, Bernstein was unimpressed with MQB, claiming that the benefits were “over-hyped.” This viewpoint had differed so drastically from my initial research on modular platforms, which hailed them as the next wave of change and innovation in the automotive industry. How could this gap be reconciled?

To fully understand and appreciate the report, I had to get into the mind of its intended end-user, an investor. The mindset of an investor is much different than that of a car enthusiast. While industry observers herald MQB as the next great leap forward for automotive manufacturing, an investor cares about one thing and one thing only: money. From an investor standpoint, if MQB cannot deliver any value though its stated cost savings and  result increase company earnings, it is largely irrelevant.

The report states, “There may be some savings from this [MQB], but they are likely to be very modest.”[1]  The modest nature of these savings stems from a number of sources. First, MQB does not help to lower a manufacturer’s major costs like raw materials, labour, and assembly hours. Remember that economies of scale, at its core, is the ability for a business to save money by spreading its fixed costs across a higher volume of production. This definition would lead to the assumption that by standardizing all of its platforms, VW will be able to cut costs throughout the supply chain by having their suppliers reach economies of scale. However, the report argues that past a production level of 1 million units, there begins to be diminishing returns.

Bernstein explains, “scale economies are usually exhausted at the plant level rather than the firm level.”[2] Since most OEMs are already at full scale, they already purchase parts from suppliers in some sort of economic batch size. In order for suppliers to save through economies of scale, they would have to increase their production. Since suppliers are also already at full scale, they would have to increase the capacity of their plants in order to increase their output. The capital expenditure related to increasing capacity, whether it is machines or labor, effectively negates any sort of cost saving that was originally sought after.

Theoretically, if VW sourced its parts and raw materials from one centrally located monster plant, it would be much easier to realize these savings. VW’s geographical diversification and localized sourcing makes this much harder to achieve, as each separate location has its own associated fixed costs. Think about it in terms of trying to house all of your cars in one mega garage, or in 10 separate garages across the city. The one mega garage has a single set of maintenance and utilities, which the latter option has 10.

A more grounded figure for MQB’s cost savings is somewhere in the neighborhood of 2%-5%, similar to what Renault-Nissan claimed. As mentioned above, 2% is not the most attractive number to unveil to the public, but this relatively small figure should not be dismissed completely. VW’s costs of sales were over 157 billion euro in 2012. A 2% cost saving would translate to an additional 389 million euro in earnings before interest and taxes, or an addition of 0.83 euro on a per share basis. Even on the lower end of estimations, it is clear that if MQB can help lower costs by any amount, it still helps to deliver value to VW and its shareholders. If you were to put $389 million in my pocket, I wouldn’t be too upset.

When considering the competitive nature of the automotive industry and the resulting intense margin compression that manufacturers face, the amount of cost savings are even more impressive. I like to think about it in terms of a Formula 1 race, in which the shaving of even a few milliseconds off of a car’s lap time is a huge accomplishment. Success is relative, and numbers, whether they be tenths of a second or percentage points, are meaningless without context.

Even if savings derived from MQB are under 2%, let alone 20%, it still provides a huge strategic advantage for a multinational auto manufacturer like VW. The ability to remain flexible across its product offering will allow VW to continue to serve existing and emerging markets, each with its own specific needs. It will be interesting to see if VW can effectively leverage MQB’s capabilities in its implementation. The ability to “flex” plants quickly (from a Golf to a Tiguan for example) based on market demand is one aspect that has been barely mentioned, but could prove to be a significant advantage.

Graeme Kreindler is an HBA Candidate at the Richard Ivey School of Business at The University of Western Ontario. 

TTAC thanks Max Warburton and Bernstein Research for providing the report.

GM published global sales numbers for the first quarter of 2013, and media from The Detroit News to Bloomberg considered it headline material that GM edged out Volkswagen – barely. Who would have thought that the scrappy maker of cars that – if the blogs are to be believed – can’t keep their wires from crossing is breathing down the neck of the formerly mighty General?

GM sold 2.36 million units worldwide in the first quarter, the company says. Volkswagen is just 90,000 units behind at 2.27 million sold. GM’s sales grew 3.6 percent in the first quarter while Volkswagen’s grew 5.1 percent – despite a very tough situation at home in Europe.

Toyota will publish its quarterly numbers some time next week, so for the time being we can only extrapolate from the first two months. The picture for the first quarter is what we probably will see for the rest of the year: A very tight race for the top spot that could be won by any of the three once the year is over.

Toyota had planned for a flat 2013 to digest the large increases in the prior year. This was before the island troubles put a crimp in their plans and those of all Japanese automakers in China. Toyota’s worldwide production was down 6.2 percent for the first two months of the year, and we expect this trend to continue.

In the same China, the race for world dominance is decided. Volkswagen sold 769,200 units in China in the first three months, up 21.3 percent from the 633,900 it sold last year. GM kept Volkswagen in check in China by selling 816,373 units, up 9.6 percent. Nevertheless, even there the race is tight, and the two contenders are separated by what counts as rounding errors in China.

Redesigning retro is a herculean task. You need to change the vehicle enough to be worth the effort, meanwhile maintaining an iconic retro theme. If you don’t change enough, shoppers won’t see a reason to trade in their old flashback for the new time capsule. Change it too much and you’re left with a caricature. The task is so daunting that few even attempt it. (Just look at the one-hit-wonders: PT Cruiser, HHR, SSR and Thunderbird.) VW on the other hand is different. After all they continued to build and sell the same Beetle with minor tweaks for 65 years straight. If anyone can tweak retro and convince people they need it, it’s VW. Sure enough, 2012 was the best Beetle sales year since 1973. As a chaser to VW’s revived retro-mojo, the Beetle is now offered sans-top and VW tossed us the keys to a brown-on-brown model for a week so we could get our 70s on. Can you dig it?

Click here to view the embedded video.

Exterior

This Beetle, like the old “New Beetle,” sells on nostalgia and cutesy-bubbly good looks. In fact, the first words anyone utters upon seeing a Beetle are: “aww, its cute.” See the problem? How many guys buy “cute” cars? Recognizing the problem, VW set out to “butch things up” with the second generation FWD Beetle. The bubbly-fenders, round headlamps and “smiling” hood lines haven’t left but they have been joined by VW’s corporate “Gillette” grille,  sharper corners and more “masculine” tail lamps. (Or so I’m told.) The redesign also adds an incredible 3.5 inches to the Bug’s width and 5 inches to the length. The extra length means the Bug’s side profile is no longer semi-circular, something of a loss for retro fans. The wider stance and crisper creases do make Herbie look meaner, but the ginormous fenders make him look fatter as well.

Since nostalgia sells, VW offers the Beetle in decade-themed editions. There’s an all-black ’50s edition, a periwinkle turbocharged ’60s edition and the chocolate brown ’70s edition VW lent me (perhaps they knew I’m a child of the ‘ 70s?). Should you not care for VW’s packaged time-travel holidays, you can order your ride a la carte. Any way you order it, your bug will come with a black or beige canvas top which opens in 9 seconds while traveling up to 31 MPH. Why does that matter? Because you can go topless at a stoplight without fear that you’ll hold up traffic when it turns green. Volkswagen manages this feat by having the top drop onto the deck lid rather than going inside the trunk like most modern convertibles do. As a result the operation is faster since the trunk doesn’t have to open, the mechanism is less complex and the classic look of the Beetle ‘vert (with the top that looks like a canvas spoiler) is retained.

Starting at $24,995, sawing the top off your Bug will set you back $5,000 vs the coupe. If that sounds spendy, keep your top on, the convertible premium is higher on some of the competition. The 70s edition convertible (as tested) comes in one trim level with no options at $28,595, $5 more than a base turbo convertible. If you feel like burning oil, the TDI convertible starts at $28,690. The 60s convertible which represents the “top of the line” drop-top Beetle tips the scales at $32,395.

Interior

Bug defeminization continues on the inside with fewer round shapes, more creases and VW’s flat-bottom steering wheel. True to the retro mission you’ll find large portions of body-color-matching trim parts inside. That worried me at first but VW appears to be using high quality coatings as none of the painted bits showed signs of scratching like low-mileage PT Cruisers. As a close relative of the Golf and Jetta the Beetle borrows heavily from the communal parts trough, however, that parts sharing doesn’t extend to automatic climate control or power seats.

Despite the lack of power adjustability, front seat comfort in the Beetle was excellent on my long commute. Sadly finding a comfortable driving position took more time than I bargained for due to the bizarre recline knob. The fact that the recline mechanism is controlled by a knob is odd enough, but its position on the side of the seat is awkward to use. If you regularly share cars with your significant other, this could be a sore spot. The Bug’s rear seats have become a tad more spacious in this generation, but should still be considered “emergency” back seats due to a severe lack of leg room. On the bright side, the tall roofline means there’s enough headroom in the back for the average adult to sit upright.

Once upon a time there was no option for leather seats in the Beetle and we have now come full circle. Like a number of other manufacturers, VW has been slowly killing off real cowhide in their cars. For 2013 the only upholstery option in the Beetle convertible is V-Tex leatherette.

Because the lid doesn’t collapse into the trunk, the cargo slot remains 7.1 cubic feet when motoring topless. While that doesn’t sound like much space, it is a huge step up from the old Beetle’s 5 cubes. That’s the difference between an adult fitting in the trunk and not. (You’ll have to watch the video for that explanation.) Unlike most convertibles, the rear seat has a trick up it’s sleeve: it folds down (50/50) to reveal an honest-to-goodness cargo opening.

Infotainment

Sorry ’70s fans, our chocolate brown Bug didn’t come with a built-in CB radio. Burn! Instead shoppers will need to get hip with the 21st century, VW style. Base drop-tops get an AM/FM radio, single slot CD player, Bluetooth speaker phone/audio streaming and VW’s USB/iDevice interface (MDI). Working your way up the ladder, the next stop is the touchscreen audio system which adds HD Radio, SiriusXM Satellite Radio and am MP3 compatible CD reader (why is there no 1990s edition?).

’60s and ’70s edition models come standard (optional on other Bugs) with VW’s 5-inch touchscreen navigation unit (RNS-315). This is the same system found in VW vehicles from the Golf to the Passat. Unlike VW’s large-screen nav unit, this one stores the map data on 4GB of built-in flash memory meaning the database is smaller and less detailed. Compared to the latest offerings from the competition, VW’s nav system is slow, less polished and less intuitive. Instead of using a USB port like everyone else, VW still uses a short proprietary cable in the glove box, a pain if you use your cell phone as your music library. An MDI-iDevice cable comes with the bug, but if you’re not an Apple fan you have to buy the corresponding cable separately from your dealer. Shaking salt on the infotainment wound is a distinct lack of voice commands for your music library, something that is rapidly becoming universal. On the flip side, the 9-speaker Fender speaker system is rad to the max. VW: do me a solid and give the Bug some much needed infotainment love. Dig?

Drivetrain

You won’t find a air-cooled engine in this Beetle, this isn’t the ’50s. Base Beetles (and the ’50s and ’70s edition models) use VW’s refreshed 2.5L inline 5-cylinder engine which gets a 20 HP bump to 170 at 5,700RPM while torque creeps up to 177 lb-ft at 4,250 RPM. The sole mate to the 5-banger is an Aisin-sourced 6-speed automatic, not the 6-speed DSG. If you need more shove, you can opt for VW’s ubiquitous 2.0L turbo, good for 200 ponies and 207 lb-ft of twist. A first for America (as far as I know), VW’s topless cruiser can now be had in oil-burning form with the same 140 HP 2.0L TDI powerplant as the Jetta. Both 2.0L mills are mated to VW’s slick-shifting 6-speed manual transmission or for $1,100, VW’s latest 6-speed dual-clutch DSG transmission.

VW’s 5-cylinder engine has received a bad rap in the press due its unusual exhaust note but I found the funky burble strangely pleasant. Liking the exhaust note is important because you’ll be hearing quite a bit of it as you try to motivate 3,200 pounds of convertible. The “half-V10″ is smoother than the current crop of VW 4-cylinder engines and with the bump to 170 HP it is perfectly serviceable for most drivers. The 6-speed slush box is fairly typical for the compact segment: eager to up-shift, reluctant to down-shift and far less engaging than VW’s excellent DSG units.  Thanks to some efficiency improvements we averaged 26.2MPG over 620 miles of mixed driving in the 2.5 even though the EPA rating is 21/27 (city/highway).

Drive

The 2.0L turbo is underpowered when you compare it to the modern crop of direct-injection 2.0L turbos from the competition. The engine also has something of a split personality, being both rough around the edges and high maintenance with its coarse sound and appetite for premium gas. If you are willing to pay the toll, your reward is the fastest 0-60 time of the bunch, a full 2 seconds faster than the 9.2 second run our 2.5L tester scored. Is it worth it? Yes. If for no other reason than to get the DSG “automatic” or the 6-speed manual, both of which are more driver-oriented than the tranny choices coupled to the 2.5. Despite sporting a higher 21/30 MPG rating, it wasn’t  cheaper to operate than the 2.5L thanks to its hunger for expensive gas and my heavy right foot.

I had only a limited opportunity to test the 2.0L TDI, but it’s exactly what you would expect. It’s slower than the 2.5L, has only a slight diesel burble inside the car and gets incredible mileage. What you might not expect is that it’s only $1,200 more than a comparably equipped 2.5L Beetle Convertible which is a great deal, if you can find one. Thanks to its 28/41 MPG rating (with the DSG), the TDI can get you from your Berkeley loft to Burning Man and back, if you treat it gently. And important consideration to maximize your funkadelic weekend and make it back to your human studies class on time.

The Beetle coupé uses the same torsion beam suspension as the Jetta and Golf in normal trim and a variant of the GLI’s multi-link suspension when equipped with the turbo engine. Thanks to the extra weight and a desire to maximize trunk volume, all convertible Bugs get the multi-link setup. The suspension swap makes the convertible feel almost as composed as a turbo Beetle coupé on broken pavement, a notable improvement over the base coupé. That doesn’t mean the convertible has any sporting aspirations however, the topless Bug has been tuned for a softer ride, more fitting for a boulevard cruiser.

When the going gets twisty, the polished city ride begins to fall apart. Despite being 20% more rigid than the New Beetle convertible, there’s still plenty of body flex and a hair of cowl shake. This isn’t unusual for a mass market soft-top, but I had hoped for a ride more similar to the stiffer EOS hard top. If your top is up, expect some occasional squeaks from where the top meets the body on broken pavement (even dealer provided testers suffered from this problem.) If the top is down, just expect a less rigid ride than you will find in the Beetle coupé. That’s not to say the Beetle is a wet noodle on winding roads like ye olde La Baron, but it’s certainly not up to the same standard as the new Mustang or Camaro convertibles and even the Chrysler 200 seemed more rigid on the back roads.

How well the Beetle accelerates and handles is unlikely to matter to prospective convertible shoppers. I’m not kidding. There isn’t a drop top I can think of that has better performance metrics than its hard-top donor car, that’s just the nature of the beast. Convertibles are all about open air motoring and style, something thee Beetle, despite all of its flaws, still has in spades. VW’s infotainment options feel like they are stuck in 1990, the lack of power front seats and automatic climate control irk me to no end, and the 2.0L engine needs a testosterone injection, yet the Beetle’s topless charm is enough for me to overlook its flaws. The Bug’s price is even right when you consider a topless Chrysler 200 starts at $27,100. There is only one “problem:” Herbie’s still cute.

Hit it

• Unique 5-cylinder engine note. (I know, I’m crazy.)
• Going topless at 31MPH is handier than I thought.
• The TDI is an excellent value.
• Still cute.

Quit it

• VW’s base navigation system is getting old.
• 200 ponies from two turbocharged liters isn’t anything to brag about.
• Reclining a seat using a knob is an exercise in frustration.
• Still cute.

Volkswagen provided the vehicle, insurance and one tank of gas for this review

Specifications as tested

0-30: 2.98 Seconds

0-60: 9.2 Seconds

1/4 Mile: 16.83 Seconds @ 83 MPH

Average Fuel Economy: 26.6 MPG over 620 Miles

Bernstein Research analyst Max Warburton thinks that the cost savings being anticipated by investors regarding VW’s MQB modular architecture will not materialize as planned.

MQB has been touted as a way to cut production costs by 20 percent via standardizing vehicle “hard points” like the pedal box and engine placement, while allowing for significant flexibility in other dimmensions. But Warburton remains a skeptic, telling the Detroit News

“We have long argued that the savings from MQB have been over-hyped and were inevitably set to disappoint. There is absolutely no way a new platform can save 20 per cent of the cost of a vehicle at VW’s level of scale,”

That assessment runs counter to estimates from banks like Morgan Stanley, which forecasts a savings of as much as $4,000 per car and as much as $10 billion in gross savings by 2016, once MQB has been implemented over 4 million cars. But the often touted benefits of scale don’t hold up for Warburton, who believes that returns are less significant beyond 1 million units.

From a product perspective, Warburton also believes that MQB’s extreme flexibility – from A to D segment cars – could be more of a hinderance than a help

“Either VW can engineer a Polo with Passat-level weight, rigidity and specifications, or a Passat with Polo-grade components. Most industry experts think VW will end up with a much too expensive small car platform…there are many reasons why VW may be able to resume profit growth in future years. It has great brands (Porsche now as well as others like Audi, Bentley and Lamborghini), products and technology, a unique position in China and one day the European car market will recover. But its margins are not going to expand magically just because it has a new platform,”

While TTAC has long been bullish on MQB and modular platforms in general, Warburton is a credible authority on the auto industry, and his concerns are not to be dismissed. Savings of 20 percent are indeed unprecedented for the auto industry, but with margins so thin and volume so critical, there is no doubt that MQB will be a significant technological advantage for VW. Nevertheless, TTAC has always been concerned about the possibility of cascading failures of standardized components that could lead to unprecedentedly large recalls. Only time will tell how these scenarios will play out.

Volkswagen chairman Ferdinand Piech solidifies his and the Piech-Porsche clan’s control of Europe’s largest carmaker by placing his wife in positions of power. A year after taking a seat on Volkswagen’s supervisory board, Ursula Piech will be up for certain election to Audi’s supervisory panel at the annual shareholders’ meeting on May 16, Reuters reports.

Audi is owned by Volkswagen, but its shares are listed separately. According to Reuters, the election “to the board of VW’s biggest profit contributor will be nothing but a formality.”

Ursula Plasser, a trained kindergarten teacher, was hired by Piech as a nanny when he lived and produced two children with Marlene Porsche, the wife of his cousin Gerd Porsche. The children came in addition to five he had from a previous marriage and two “from another connection.” Ursula was buxom, blond and 25. Two years later, she was married to Ferdinand Piech, who was and is twenty years ahead of her.

Provided she does not remarry, Ursula Piech will take over her husband’s interest when he dies. Ferdinand Piech will turn 76 on April 17.

No works council without representation. Those are the words of UAW President Bob King, in an interview with Autoline Detroit, when asked about a possible works council at VW’s Chattanooga assembly plant.

The Detroit Free Press quotes King as stating

“In the U.S., you can’t do a works council without the workers being in a union,” King said during the Autoline interview. “So if those workers want to have a works council in Chattanooga … then they would first become UAW members and then would bargain in a works council system.”

The full interview is scheduled to air on May 10. TTAC has previously covered the idea of a works council, and the interplay between the UAW and German union IG Metall.Feel free to brush up, because this is something we’ll be hearing a lot more about in the coming months.

VW and Fiat are in talks regarding a possible sale of Alfa Romeo. The sale of Alfa Romeo to Audi would also include the Pomilgiano assembly plant in Naples, which once made Alfas, but currently produces the Fiat Panda. Magnetti Marelli, Fiat’s famed parts maker, may also be included in the deal, as Fiat looks to raise cash so it can buy the remaining shares of Chrysler off the UAW’s Voluntary Employee Benefits Association.

Meanwhile, Audi has already established a presence in Italy with both Lamborghini, Ducati and Italdesign. Adding Alfa Romeo and an Italian plant would only entrench its standing, and the sale of an assembly plant would be mutually beneficial for both VW and Fiat, as Alfa could retain its “Made in Italy” heritage while Fiat looks like a hero by ensuring that the plant and its workers have some security. Of course, nobody knows what VW would even do with Alfa, considering its sales picture is even bleaker than VW’s ailing SEAT brand.

Take a look at this piece of…

272,522 miles. No fooling. This 1996 Volkswagen Passat 5-speed sedan has traveled a distance nearly equal to 11 times the circumference of planet Earth.

It also visited the dealership well over 50 times during that time period as well. Which is just barely good enough for…

38th place.

Now granted that is number 38 out of 6,894 cars that were traded into a large dealer body for this week alone. 38th place also happens to be the highest finish for any non-TDI Volkswagen for all of 2013 thus far.

So obviously this car belongs in a museum. A Ripleys museum. Right next to the one and only Daewoo that made it to 100,000 miles.

On a more serious note, VW is soundly beating GM at this point. So long as you look at one and only one GM model, the Pontiac Grand Prix.

For this week VW managed to garner 8 trade-ins with over 180k miles while the notoriously plastic fantastic Pontiac Grand Prix managed a mere six vehicles. Of course there were 39 Grand Prixs and 178 Volkswagens in the trade-in mix this time around. But the German people’s car needed to find a victory somewhere in our quality index, and there it is.

Today’s number one and two offers the same powertrain as last week’s number one.

Two Chevy Silverados chalked up 354,646 miles and 346,192 miles respectively. That wasn’t as good as the 1999 Suburban that went 412,372 miles the prior week. But it’s good enough to be at the top of the heap.

As for the bottom, here’s how a few other brands fared for this week when it comes to reaching the over 180k mark at trade-in time.

Suzuki : 2 out of 27 (best showing so far!)

SAAB   : 0 out of 41 (the usual…)

Kia       : 0 out of 85 (ditto…)

Jaguar : 1 out of 37 (may require a recount.)

Audi     : 2 out of 71

261 vehicles from these brands, collectively, could not beat a mere 39 Pontiac Grand Prixs for this week. Or the entire quarter for that matter. In fact the only true shocker for this April Fools Day is that if you added Volkswagen’s 8 strong and solid vehicles out of 178, those brands come in second to another notoriously poor brand…. Mitsubishi.

Which scored a surprisingly sound 14 out of 97 cars with over 180k. Including this Mirage with 281,146 miles and no announcements related to mechanical defects. If you want a hidden gem among the unpopular brands and models, try to find the one or two Mirages that weren’t sent to an early subprime grave.

In the meantime, there were 104 Toyotas with over 180k, 124 Hondas, 106 Chevys (mostly trucks), and exactly 100 Fords (same story… with a few Panther vehicles in the mix).

Cadillac continues to be another luxury charity case with only 3 vehicles with over 180k miles out of 132 for the week. While less prestigious, but far more mechanically sound Buick continues to blow away the big brother with a score of 13 out of 110.

All of you who continue to clamor me about good deals at the auctions may want to look at one place.

The Buick Century. A jaw dropping 10 of them from the 1998-2001 period were sold as True Miles Unknown due to their odometers no longer functioning. The fix for it is only $2 in parts and a half hour of labor. But I’m not telling the dealership about it.

It’s my job to know about these types of things, and their job to keep on pushing those types of cars in my direction.  Unpopular. Unappealing. Uncertain histories if you don’t do your research before the day of the auction. Yet, these Centurys are usually conservatively driven and offer a great bang for the buck for the non-enthusiast.

Those looking for ‘nice’ basic transportation happen to be my primary clientele.

Well, there you have it for this week folks. The quarterly numbers are being crunched by the TTAC volunteer corps as we speak. I’ll have the results to all of you later in the week.

All the best!

The MQB invasion is here, and we no longer have to deal with the awful 2.5L 5-cylinder engine. Three engines will be available on the MK7 Golf. A 1.8T 4-cylinder making 170 horsepower and 184 lb-ft of torque, the familiar 2.0TDI (silver car) and of course, the 2.0T gasoline motor in the GTI.

Detroit is a funny market when it comes to advertising. In addition to the ads, commercials and billboards that you might see or hear in other markets from national and regional advertisers, there is some advertising that is specific to the automotive industry, usually from tier 1 vendors trying to make a sale to one of the domestic automakers. As a result, there might be a billboard on I-75 about, for example, exhaust systems, suspension components or audio equipment that is targeted at a relatively small audience, the people at Chrysler, GM and Ford who make the final engineering and purchasing decisions.

Driving home from an errand I heard the announcer on WJR, “the great voice of the Great Lakes broadcasting from the golden tower of the Fisher Building”, start talking about the synergy when two musicians first meet, discuss common influences, then get together, plug in their instruments and start to write songs. I thought he was going to discuss when Lennon met McCartney or when Richards met Jagger but in fact it was a live commercial announcement for how Panasonic and Fender have partnered to sell Fender Premium Audio branded stereos to the OEMs. Apparently the deal that VW has to sell Panasonic made components labeled with Fender’s brand is not an exclusive one.

It’s interesting that Panasonic thinks that Fender is a brand name that has more cachet with consumers when it comes to premium audio equipment than the Panasonic brand name itself. It’s doubly interesting because Fender has, until now, not been a brand for consumer audio equipment, premium or otherwise. This deal should make it clear that just because your car may be branded with the name of a particular audio company doesn’t mean that specific company actually made or even sold what’s installed in your car. The fact that your car comes with Fender Premium Audio doesn’t mean that Fender made the stuff any more than buying a Bill Blass Edition Lincoln meant that you were getting upholstery that came out Mr. Blass’ workshops, if he had them. A brand is a brand, just a mark.

Actually it’s triply interesting since the announcer in the commercial touted “Fender’s distinctive sound”. Now I don’t play guitar but I do make a little bit of noise in key on the harmonica, and if there is something  distinctive about the sound of Fender amps and loudspeaker cabinets it is their distinctive distortion. As you can see from that link, Jack Baruth discussed this back when the deal with VW was first announced, and we shared a laugh about this, but I never thought they’d actually use “Fender’s distinctive sound” to sell high fidelity audio systems.

The ideal amplifier, electronically speaking, adds no distinctive audio signature. What goes in comes out, only with more gain. There’s no such thing as the ideal amplifier, but makers of audio equipment used to reproduce music generally design and test equipment to have as little distortion as possible. Sometime in the history of rock and roll or the blues, though, someone figured out that if you turned the amps up loud enough so that the preamp would overdrive the output tubes to distortion levels (this was before transistors and other solid state components), you could end up with some very cool sounding music. Not all distortion is unpleasing. While odd order harmonics are what makes fingernails on a blackboard so grating, the ear tends to like even order harmonics. Guitar players and players of other electric instruments, like harmonica players digging through a box of half-century or older ceramic microphone cartridges, are going for the right combination of distortion. Also, if you chose the right sized drivers for your loudspeaker, you could get them to break up and distort in a pleasing and artistic manner as well. The net result is what players call “tone”.

That’s the reason why guitar players love the sound of amps like the Fender Bassman, and others derived from Fender’s 1950s classics like Marshalls. They love the distinctive distortion

That’s not the case with home audio equipment and likewise the stuff you want in your car. That gear is intended to be as much like the theoretical  ideal amplifier as possible. I’m quite sure that the Fender branded audio equipment that is being sold to OEM’s by Panasonic has fine distortion specs. CNET ranked the stereo in the VW Beetle Turbo as their personal favorite for 2011, saying it competed well with audiophile home equipment. I’m sure that Fender Premium Audio equipment very accurately reproduces “Fender’s distinctive sound” well. It may not make my ears bleed but it does make my head hurt.

The last election cycle in the United States brought forth the term “low information voter”. That’s made me think about low information consumers. There is, after all, a reason why Panasonic has hooked up with Fender. The Fender brand has recognition well beyond the relatively small community of electric guitar players and other folks familiar with guitar amps. I don’t begrudge Fender and Panasonic and VW and whoever else decides to spec Fender Premium Audio in their cars the right to exploit that brand identification. I just think that they’re treating people like low information consumers and that most of Fender’s existing customers must laugh in derision when they hear about “Fender’s distinctive sound” when it comes to car audio. The fact that Panasonic and Fender think that the folks who make engineering and purchasing decisions at car companies are also low information consumers is noteworthy as well.

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can get a parallax view at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks – RJS

1 million units a year. That’s going to be the minimum volume necessary for car makers to survive, if you believe SEAT boss James Muir. His struggling brand sold just 320,000 cars last year, and their exposure is largely limited to economically ill countries in the sunny areas of Europe.

This would be a recipe for disaster for most car companies, but luckily, SEAT is part of Volkswagen. That doesn’t mean their survival is guaranteed, but it does help. SEAT is hoping that the new Leon C-segment hatch, as well as an upcoming MQB-based rival to the Nissan Qashqai, will help increase their overall volume. But it’s hardly a done deal.

In an interview with Autocar, Muir outlined the brand’s predicament

“We have to bring volume to the table as well as profits…in the short-term that means the investment we have received for the Leon family needs to translate into sales. Then every bit of investment we get thereafter needs to pay off. With that, we can shout louder within the Volkswagen Group to get more investment.”

With Volkswagen and Skoda crowding the low end of the marketplace, it’s tough to rationalize why Seat even needs to exist. While the brand has traded on sporty products like the Leon and Ibiza Cupra, the Qashqai rival, sold at an appealing price point could end up being the brand’s savior.

For years, Greenpeace and Volkswagen were engaged in a low level conflict over alleged high levels of CO2 emissions. Now, both sides decided to declare victory and to go home. After announcing ambitious CO2 goals before the Geneva Motor show, Volkswagen had a sit-down with Greenpeace, where both decided to bury the hatchet.

Volkswagen CEO  Martin Winterkorn met Greenpeace Chief Executive Director Brigitte Behrens and told her:

“I guarantee that we will do everything in our power to reach carbon dioxide emissions of 95 grams without any reservations. However, this will only be possible if customers accept our advanced alternative powertrains. This is of course our objective.”

Behrens agreed and said:

“This is a decision in favor of climate protection and a key signal for committing to the protection of the environment and society and the series production of climate-friendly technical solutions. We will remain in dialogue with Volkswagen, also with regards to mobility concepts for the future.”

In retrospect, Volkswagen calls the war ” a constructive and in some cases also confrontational dialog.”

What I’d love to find out, but probably never will: Did Volkswagen finally pay Greenpeace off, or did Greenpeace decide to bug someone who rolls over with greater ease?

A vow of celibacy? Threatening to cut someone’s throat at a race track? Flowing locks? No, silly. They both love the Volkswagen Phaeton.

Our raven haired race car driver famously owned not one but two Phaetons, thereby earning himself the title of “masochist of the century” and a complimentary membership to Opus Dei – Jack’s self-mortification was only financial, rather than physical, but I’m sure the order will admit him anyways.

Meanwhile, our Pontiff is a Jesuit, and is more concerned about things like social justice and acts of humility. No wonder he’s shunned the Mercedes SUVs of the past in favor of the discrete Volkswagen Phaeton with a TDI powerplant. I wonder if Herr Schmitt, our other resident lapsed Catholic (now practicing Shinto) ever envisioned this coming to pass during his days at VW.

The head of Germany’s metal worker union IG Metall, Berthold Huber, urged workers at Volkswagen’s Chattanooga plant to join the UAW. In a letter distributed to Chattanooga workers, obtained by Reuters, Huber says:

“In Chattanooga, you need union representation.”

“We strongly recommend that the eligible employees at Volkswagen, Chattanooga, decide that the UAW should represent them.”

Last week, Volkswagen’s  HR chief Horst Neumann said Volkswagen is in talks with the UAW about setting up a German-style works council in Chattanooga.

Reuters sees Neumann’s comments  as “about-face for an automaker that has resisted opening the U.S. plant to the UAW.”

However, it should be kept in mind that Neumann is a delegate of IG Metall, one of the strange twists of labor relations at large companies in Germany.  Also however, if the IG Metall wants it, Volkswagen management most likely will not say no.

With Europe in trouble, and a free trade agreement with the U.S. and the EU on the horizon, German unions don’t want plants abroad to be too competitive.

In the meantime, IG Metall has come under strong criticism for its role in cutting a deal with GM over Opel. Workers at three Opel sites in Germany approved a plan that will end car production in Bochum after 2016, but will keep 1,200 jobs there.  Who has not voted on the plan are the Bochum workers. They will vote tomorrow, after their works council chief  Rainer Einenkel complained about  “very strange and not really helpful” deals that would split the workers.

News of Volkswagen being open to establishing a works council at its plant in Chattanooga are widely interpreted as the UAW getting a long-sought nose under the southern tent. It could also be a shrewd move to block the union.

First, the facts: Horst Neumann, VW’s board member in charge of human resources, told reporters on Friday that Volkswagen was “in talks with the UAW about setting up a German-style labor board at the Tennessee plant,” Reuters says.  IAW President Bob King  is all in favor and said that “the UAW is very interested in the specific model that VW wants to present in the months ahead, and we are looking forward to open, fair and respectful dialogue.” Little else is known.

Now, for some background:

• A works council or labor board is not a union. It is a German construct, and acts as the representation of the employees. Members of the works council are elected by the employees. The works council has rights provided by German law.
• Horst Neumann is a member of the German Metal Worker Union IG Metall. The HR-Chief or “Arbeitsdirektor” of a large German company represents the workers and usually the unions on the Board of Management.
• Works councils of large German automakers have spread to Europe, and it is known that they want to spread globally.
• Workers at Volkswagen Chattanooga usually are opposed  to the UAW. Reuters cites a meeting of March last year, where a worker, addressing the crowd in a meeting, said the plant did not need a union, which was met with loud applause and cheers. However, it is also known that workers in Chattanooga would like to have a works council just like in Germany.

Establishing a German-style works council in the U.S. without the protection of German labor laws would basically turn it into a lobbying group of the workers. It does not necessarily mean that the UAW can run or even co-opt it.  Neumann already said that the UAW is not the only option.

Harley Shaiken, a University of California-Berkeley labor studies professor, said that such an agreement could spread to Japanese and South Korean-owned U.S. plants.

Establishing works councils could also be a blocking move: If workers have their elected representation, they will even less need a union.

Volkswagen has been tinkering with hydrogen for longer than I can remember. Yesterday, CEO Martin Winterkorn said it was all for naught. Hydrogen fuel cells are unlikely to become a cost-effective way to power cars in the near future, Winterkorn told Automotive News at Volkswagen’s press conference in Wolfsburg. He said it’s not Volkswagen’s fault:

“I do not see the infrastructure for fuel cell vehicles, and I do not see how hydrogen can be produced on large scale at reasonable cost. I do not currently see a situation where we can offer fuel cell vehicles at a reasonable cost that consumers would also be willing to pay.”

Automotive News takes that as an indicator that VW won’t join a list of global automakers that want to roll out fuel cell vehicles in the 2015-2020 time-frame, among them Toyota allied with BMW, a Nissan-Renault-Daimler-Ford alliance, Hyundai, Honda, and more.

Instead, VW is seen to embark on a somewhat belated diesel plug-in hybrid strategy, while hybrid pioneer Toyota does not have a problem envisaging fuel cell vehicles at a reasonable cost. Two years ago already, Toyota’s chief engineer Satoshi Ogiso told TTAC that an affordable hydrogen-powered car in this decade is “his job.”

No overcapacity problems at Volkswagen – at least not globally, and especially not in China. “Within the coming years, we will build at least ten more plants – seven of those in China,” Volkswagen chief Martin Winterkorn said today in Wolfsburg, with Automobilwoche taking notes. By 2016, Volkswagen will have capacity for more than four million units in China, that’s about half of VW’s current worldwide output.

This year, Volkswagen will start production in Urumqi, Foshan and Ningbo. Two new component plants will open this year in Changchun. In 2014, the Tianjin transmission plant will follow. In addition, the supervisory board approved and additional Chinese plant for 300,000 units.

More factories go up in India (Scania), Russia, (MAN/ St. Petersburg, VW/Kaluga), and Mexico (Audi/ San Jose Chiapa.) Volkswagen has more than 100 plants worldwide, twelve of those in China.

Volkswagen wants to off-set a tanking European market by building cars in more promising regions. Assuming that Volkswagen can sell all those cars, world domination could be achieved within the decade.