By on March 22, 2007

oldbeetle_hr222.jpgGermany’s IGM is the world’s largest labor union. What’s more, German law dictates that half of any German corporation’s supervisory board (minus one) must be “reserved” for its members. In Volkswagen’s case, even elected board members are subject to union influence; the politically malleable state government of Lower Saxony controls VW’s elected seats. As previously described, union control over “The People’s Car” has inflicted grievous harm on VW’s brand positioning. Yet in the last year, there have been signs of change.

Traditionally, Social Democrats have controlled the government of lower Saxony. In 2003, for the first time in thirteen years, the electorate voted the conservative-minded Christian Democrats into power. While not insensible to traditional politics, the new players are not quite as close to (i.e. owned by) the unions.

As an indirect result of the election, Volkswagen managed to convince the IGM to extend their working week from 28 to 33 hours– without compensation. While it’s still a ridiculous state of affairs, the concession would have been unlikely under a Social Democrat government. And it represents an important paradigm shift in VW’s labor relations.

The second change arrived courtesy the European Union (EU), who’re moving to throw out the so-called “Volkswagen Law” unconstitutional.

The Volkswagen Law was introduced in 1960, when the government of Lower Saxony raised cash by “semi-privatizing” VW (i.e. selling part of the company to investors without losing control of the supervisory board). The legislation stipulated that no VW shareholder could exercise more than 20 percent of voting rights, regardless of the size of their stake in VW. The set-up guaranteed the government's absolute power over VW— removing the incentive for a large institutional investor to buy a large block of VW’s stock.

When it became clear that the EU would entertain a challenge to the Volkswagen Law, Porsche AG saw a chance to finally gain control of the automaker spawned by its own founder and/or assure a supply of parts and technology. By the end of this year, when the law is officially overturned, Porsche will own at least 29.9% of Volkswagen: a controlling stake.

Of course, unlike any government (even if it isn’t Social Democrat), Porsche’s main objective is to make money. This Porsche knows how to do. As the world’s most profitable automobile manufacturer, as a long standing VW partner (e.g. the Touareg and Cayenne SUV's are platform partners), Porsche knows where to cut waste and inefficiency and how to maximize margins.

Things have already started moving at VW. Volkswagen is replacing its most important vehicle as early as 2008. The company has vowed to remove the production problems that make the Golf too expensive. It will have a less complex suspension, easier to manufacture doors and simplified electronics. VW is also likely to increase its reliance on more cost-effective outsourcing. Porsche currently produces about 20 percent of its own parts; Volkswagen still makes most of its own parts.

There will also be more economical cars. VW’s high-mileage diesels will soon share DaimlerChrysler’s BLUETEC filtering system, making them available to diesel-starved, California-compliant US states. VW recently unveiled their Polo Blue Motion, which is supposed to achieve a combined 60mpg. The emphasis indicates that VW understands the need to return to producing thrifty, reliable cars for the masses.

But even with Porsche’s help and without Detroit’s enormous legacy costs (thank you socialism), VW’s union contracts make building inexpensive German cars cheaply an uphill battle. Despite VW’s dubious track record for building “German quality” products abroad— the disastrous American Rabbit (Golf) factory and the hecho-en-Mexico Mark 3 Jetta spring to mind— the company understands the unavoidable need to build products well outside the Eurozone.

VW is certainly finding its feet in China. Working with its mandatory Chinese “partners,” Volkswagen is The People’s Republic most successful passenger car manufacturer. The company built and sold over 700k Chinese vehicles last year. Providing Germany’s unions can be appeased, it’s only a matter of time before Chinese-made VW’s start flooding into European and American markets.

If Chinese cars can embody “traditional” VW quality, if the Chinese government doesn’t suddenly nationalize their automobile industry, the German marque has a fighting chance to recapture its value-based brand promise.

It’s important to remember that VW’s brand portfolio got the company into this mess. While Bentley, Lamborghini, Bugatti and now Porsche occupy the high ground, Audi’s full-line ambitions still create embarrassing overlaps with its upmarket siblings AND the “core” brand. Model redundancies between Audi, VW and SEAT have left the Spanish brand in dire straits. At the bottom of the market, Škoda is extremely healthy, China continues apace and Malaysia’s Proton is set to join the family.

Clearly, Volkswagen, makers of the “people’s car,” still can’t quite bring itself to move the brand downmarket, back to its roots. It remains to be seen whether VW’s mid-market ambitions will ever be fully realized.

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37 Comments on “Volkswagen’s Long Road to Recovery Pt. 2...”


  • avatar
    tcwarnke

    Great article! Some of the points I made in my post for the last article.

  • avatar
    Gottleib

    Wunderbar, you have written an excellent article with a clear analysis of VW. I enjoyed reading it very much and thank you for your insight into the status of an auto manufacturer in a very complicated world.
    In my lifetime I have owned 6 VW products, 3 beetles, a Karman Ghia, a Type 2 Combi wagon and a 2000 Passat. With the exception of the 2000 Passat I always thought the best attribute of the VW was that it didn’t attempt to be something other than what it was designed to be, basic transportaion.

  • avatar
    Glenn A.

    Contrary to “popular opinion” in our fast-paced crazy world, there really is no shame in basic, reliable transportation.

    The entire Ford motor company and Volkswagen auto empires were literally built on the backs of the Model T and Beetle.

    Post-WWII, look at the the cars that saved BMW, Citroen, what became Audi (Auto-Union and DKW), Saab and Fiat from obliteration. Look at what forestalled the demise of the British auto industry for several decades (the original “BMW Free” Mini and it’s ilk – even though they never made money directly for the manufacturers, they were huge when it came to bringing name recognition before the public – for the profitable cars – adding cachet to export markets – once again bringing the name before the public – and free publicity by the “car buff” magazines).

    Over the many years of driving, I personally have usually preferred to buy new, cheaper basic transportation rather than someone’s cast-off problematical used heap.

    Not all basic transportation cars are good, however. I’ve owned a new Pinto (disasterously bad), a new Pontiac 1000 (cloned Chevette) – merely “okay” for the mid 1980’s and no better, and two Lada Riva’s (cloned Fiat 124’s) bought new in 1987 and 1990 (in the UK). These cars were actually better than anyone could imagine – within the understanding of what they were, of course.

    I found it rather embarrassing that the Russians could take a knock-off Fiat (never a great car maker, with very questionable reliability in the past) and make a better car of it than GM could with a knock-off of their own Opel Kadette/Vauxhall Chevette/Brazilian Chevrolet Chevette/US Chevrolet Chevette-Pontiac 1000.

    During my teen years, a buddy of mine and I ran around in literally dozens of VW Beetles. He’d buy and sell them, fixing them up, or trash them, or customize them, or make baja buggies out of them. I don’t think he knows to this day how many he’d owned between age 16 and 20.

    Fond memories of 30 years ago. Great articles, by the way. May VW survive, we can hope.

    But I’ll still never buy one again new or used. Sorry, VW.

  • avatar
    Jonny Lieberman

    Hmmmm… I just… What makes a Volkswagen?

    Part of it, I think, is when you inevitably have to rip the engine out for a complete tear down, you begin finding tiny little VW badges on ever valve and moving part. You then get a sense that the peoples’ cars are built by humans, and… that’s a good thing.

    Look at me, waxing nostalgic. I’ll take my W12 Phaeton in black, please.

  • avatar
    yournamehere

    if i wasnt 21 and the insurance premium wasnt out of this world i would be sitting in a MK5 GTi…that car shows me VW is starting to get it again…though they failed with the rabbit.

  • avatar
    BigChiefMuffin

    Very good article but I think the main point is the one you make in the last 2 paragraphs – just were does VW sit these days in amongst the various VW group brands? All the “middle” volume brands ( Opel/Renault/Fiat/Ford ) are being squeezed into oblivion by the premium brands moving downmarket and the cheap and far eastern brands moving up

    VW not only has to contend with this itself, but the very same competiton from within the VW group. Hard to think of a reason to buy most VW products over cheaper, better built Skoda versions or better residual Audi versions these days. Combined with the ridulous German labour laws and associated costs and it is hard to see how VW days are anything but numbered unless the make major changes. The problem is that Ferdinand Peich, who pulls all the strings at VW, has already shown himself as not the man to bite this bullet….

  • avatar
    Steve_S

    The best thing about VW is its advertising company, they make the best commercials. Seriously why take a Golf over a Mazda 3? Why take a GTI or even a R32 over a MS3 or WRX? Other companies currently do it better, cheaper and more reliably than VW. The Jetta isn’t a bad looking car but is it better than a Civic or Mazda6? The Passat isn’t bad either but is it better than Camry, Accord, Legacy, A4, TSX, etc?

    I think VW can come back if things go well for them but they need to be cheaper and on par with Honda or Mazda as far as costs. VW can make some iconic cars, the Beetle, VW Bus (no idea what the model was called) and the previous generation Jetta was good. They should bring the Sirocco and some other performance options as well as a new minivan that looks a bit retro paying homage to the old microbus like the new beetle did to the old.

  • avatar

    I brew my own fuel, which means I drive a Diesel. I drive a Diesel, which means my choices over the past two decades have been VW, or Mercedes-Benz. I prefer to keep my “daily driver” cars as “basic transportation” which means my only choice has been VW.

    I’m on my fifth new Volkswagen, a 2002 VW Jetta TDI since my first one, which was 1980 Rabbit Diesel. So far it has done me well at 105,000 miles mostly trouble-free. In fact, pretty much every VW I’ve had has been VERY reliable, and a car that has meshed well with my frugal nature. Mind you I haven’t been buying Passats or GTIs though. The most extravagant was an ’89 Vanagon, which was a wonderful family mover when my kids were little. Each VW has served me well for the 5-7 years and 100k to 200k I’ve driven them. None have ever had a significant repair bill that wasn’t fully or partially covered by VW’s warranty.

    As such I’m a happy VW customer.

    I keep hearing people diss the marque for reliability issues, but have yet to experience that myself. Parts can be expensive, but I try sourcing mine from wrecking yards or 3rd parties before trying VW themselves. That has saved me bundles. I also maintain my cars myself and only visit a dealer for major (requiring a VAG-COM setup) issues.

    –chuck

  • avatar
    SherbornSean

    onthercks07,
    While VW and the 2.5 share some problems, I think VW is in a far stronger position. Taking the long view, they have been gaining share in Europe, they are for the most part profitable, and their product is well regarded in most markets.

    Now, give Piesch a few more years in power, and they’ll be Deathwatch-worthy.

  • avatar
    yournamehere

    the big diff with VW and GM is VW sees there mistake in about 2 or 3 years…not 2 or 3 decades..

  • avatar
    umterp85

    No…the big difference TODAY is that the big 2.5 are relevant and vw is not (in the united states).

    Also if you think VW’s mistakes only go back 2-3 years—you are mistaken. The root of their problems lie in the same time period as the big 2.5..the 70’s and 80’s

  • avatar
    Martin Schwoerer

    The smart money is betting on VW. Both the common and the preferred are on 15-year highs, double for the year, and relatively tranquil in light of recent market turbulences.

    Why is this? Most reasons have been cited in Thomas’ articles. State influence is waning; the strict hand of Porsche is getting a grip; Winterkorn; China. And (as onthercks07 pointed out) socialized medical care is a very advantageous factor for industrial companies.

    Here are some more reasons to cheer for VW: Germany is no longer the sick man of Europe — after a decade of reforms, the country is turning into something of a powerhouse. De Silva will hopefully work his magic and turn Murat Günak’s awkwardness into something sexy. The Golf 6 will be more profitable and still be a good car, if they do the decontenting thing right. And the GTI is a class-leading car.

    Lots of caveats though. Winterkorn is a Piech man: too in love with technology to build a people’s car. Quality at VW can be excellent (Transporter) or execreble (Touran). Porsche knows about Japanese manufacturing methods but do they know about selling mass-produced cars? Some new models are losers — just look at the miserable scIROCco. And the Polo (which I will report on soon) is boring, boring, boring.

    In short, I will bet anybody who talks about a VW deathwatch that this company will not go down within the next 10 years. But VW getting as good as Toyota? It ain’t so, Joe.

  • avatar
    Vega

    @umterp85:
    Well, given they only make 14% of total sales in North America (source 2006 annual report), the US market isn’t the most relevant to them anyhow. Remeber VW is still profitable, so if being relevant in the big 2.5 sense means loosing money on every car produced, I’m sure they don’t want to be that sort of relevant.

  • avatar
    umterp85

    vega—VW share is less than 5% in the US….you may want to revisit your source. For perspective…Buick sells almost twice the cars that VW does…if that does not speak to relevance (or lack thereof) I am at a loss. Also, please provide link that shows the big 2.5 lose money on every car produced..I would be very interested

  • avatar
    Economyst

    Porsche is not the most profitable car company in the world is that not Toyota unless you are using the metric of profit per car or ROI or some other metric other than absolute profits.

    The problem with many car manufacturers is model creep – a model like the Polo (europe) gets incremently larger and larger through each new version until it gets so large it creates space to bring in a new model like the Lupo (europe). VW problem is that Audi and Skoda have created barriers to where VW can position itself. Ford / Toyota / GM are hitting the mainstream market. VW somehow does not want to position itself there – it wants to be a premium mainstream provider – oxymoron. You can argue that people aspire to own a premium brand but you then make do with a mainstream provider until one day your dream is realised. Nobody will want to aspire to owning a VW so they cannot justify a premium.

  • avatar
    Dave M.

    “the disastrous American Rabbit (Golf) factory…”

    I always found their Westmoreland failure pretty incredible. Can’t find much info on the whole mess – is there a link out there that would provide an in-depth analysis of that plant?

    Thanks.

  • avatar
    mikey

    If all the death watches and suicide watchs come to be,and there wasn’t a domestic car company left.I would hafta buy a Honda,maybe a Nisson?I don’t know if I could drive a Toyota.
    But no way a VW.VW has built only 2 good value vehicles the bug, and the bus.and that was 30 yrs ago

  • avatar
    dean

    umterp85 said:
    vega—VW share is less than 5% in the US….you may want to revisit your source. For perspective…Buick sells almost twice the cars that VW does…if that does not speak to relevance (or lack thereof) I am at a loss.

    I believe his point was that only 14% of VW’s business came from the US, not that they had 14% of the US market.

  • avatar
    pickles and mayo

    I own a 2003 GTI with almost 70k miles on it. I have had very few problems with it. Nothing that wasn't covered under warranty, either. I can't possibly understand how anyone would want to drive a toyota or honda over ANY european car – they are so…. bland. What's exciting about a tiny engine and a shody interior when you can have a car designed by logic and German efficiency? Someone mentioned on part 1 that they should bring over skoda/seat as a "scion" of VAG… I think that would be a good idea, but launching a new brand in the US market may be too difficult. Just bring us the Fox to compete with the yaris/fit/versa and be done with it. The Scion marketing idea is a great concept, but that only works for japenese car owners who think chrome-painted plastic all over their cars is "cool". If VW were to do it, it would be a lot more expensive as profits would be lower (the fact that they are buying a VW already proves that the consumer prefers higher quality, even at a higher price)

  • avatar
    vento97

    I own a 2003 GTI with almost 70k miles on it. I have had very few problems with it. Nothing that wasn’t covered under warranty, either. I can’t possibly understand how anyone would want to drive a toyota or honda over ANY european car – they are so…. bland I second that motion. I've owned the following VWs (over a span of 23 years): 1975 Scirocco – 250,000 miles – hit by tractor trailer 1987 Golf GT – 624,000 miles – totaled in a collision with Bambi Current cars: 1997 Vento (Jetta) – 210,000 miles and still going 2003 Wolfsburg Jetta – 90,000 miles and still going To me, driving a Japanese car (or a Big 2.5 car for that matter) is like submitting a form, checking in your identity, and becoming one of the masses. Screw that! I prefer to maintain some semblance of individuality, thank you…

  • avatar
    tcwarnke

    I agree with pickles and mayo and vento97. I own a 2003 Golf TDI here in Germany and have never had a problem with it (~100,000 km). However, my “bremsbelag pruefen” (check brake pads) light just came on…does anyone know how the car senses the brake pads? I checked them and they look fine…

  • avatar
    jerry weber

    First we ethnocentric Americans think the US car market is all there is. Volkswagen is and for a long time has been number one in Europe. And unlike GM makes a substantial profit. Their latest profits were record breaking. That volks can do this and keep workers happy in their euro-cacoon envivronment is pretty dramatic. In every market except the US volks has made large inroads. Take China for instance. Do you really think that volks could run against the Korean and other third world econo cars making econoboxes?

  • avatar
    brettc

    I own a 2003 Jetta TDI, and a 2000 Jetta TDI. I’ve never had any major issues with them, just routine things have needed replacement. They get great fuel economy, and are actually fun to drive. I intend to get 10-15 years out of each vehicle. I say that because I previously had a 1985 Jetta diesel that some guy in Michigan is still driving, and my most recent 1989 Jetta diesel was sold to a farmer in Massachusetts 2 years ago. The only thing that will kill a VW diesel is a collision, rust, or lack of basic maintenance. I love VWs, but if others on here don’t, that’s fine too. Honda or Toyota would love to sell you a shiny new bland-mobile to go along with your other appliances. I just hope VW does actually bring in a new, lower end vehicle to compete with the Fit and Yaris. But they’ve never cared a whole lot about the NA market, so I wouldn’t be surprised if the cheapest car remained the Golf.

  • avatar
    tom

    @jerry weber:

    It’s true that VW is on its way up, but you have to distinguish between Volkswagen AG (the company) and Volkswagen (the brand), since most of the profit comes from Audi.

    But even so, 2006 was a great year for Volkswagen. There are no official numbers for the VW brand itself, only for the Volkswagen Car Group which consists of Bugatti, Bentley, Volkswagen and Skoda.
    And the spending cuts were effective. The car group came back from losing money in 2004 to making about 500 Million € in 2005 and now almost tripled that sum in 2006. It would be interesting to get more detailed data, but unofficial numbers indicate that Skoda alone was responsible for approx. 500 Million € in 2006 while Bentley’s profit probably exceeds Bugatti’s loss.

    Yet the problems remain. The Asians (especially Toyota) are slowly gaining ground, Fiat landed a major success with the Grande Punto and their Alfas, Opels latest Astra can finally compete with the Golf (well, sort of) and others are reaching downwards (Mercedes A & B-Class, BMW 1-Series, Audi A1 & A3, Volvo C30…).

    If VW doesn’t commit to more serious structural changes, they’ll soon find themselves where they were in 2004.

    But VW is aware of that and I don’t see any future for building small VW cars in Germany. The new tiny VW that’s suppost to undercut the Fox will most likely be built in India, while the Skoda plants in eastern Europe can easily be used to produce the Polo or the Golf and I think that’s what’s going to happen…

  • avatar
    tincanman99

    The articles are very interesting but have a very American centric view of the world – ie. unions are bad, socialism is bad, anything to make a buck goes, we must cut costs. The proverbial race to the bottom.

    If I were VW I would be very hesitant to implement American business models. What does American build and export that anyone in the rest of the world wants?

    iPods and Nike sneakers made in Asia do not qualify as American made products. Cars? Nope. Stereos, tv, electronics? Nope. Pots and pans? Nope. Furniture (almost all in China now)? Nope.

    How about all those service jobs like engineering and programming that were supposed to be the future of America? Nope. Gone to Asia too.

    So much for the esteemed American business model.

    I do agree that VW needs to be cost competitive with other makes. That makes sense. What VW was thinking about when they decided to be like Audi is beyond me. I never understood it. But hey if they have the balls to make cars from el cheapo to high end luxury cars – more power to them. Though it is stupid to compete with Audi.

    On a sidenote about the reliability I have had 4 of the beasts and they have been good to me: 2 Sciroccos, a Golf and a 2001 Passat. None have been have been any less reliable than Honda.

    I had an Acura Integra Vtec made in Japan. It was a good car but it had the personality of a sewing machine. Very reliable but it did not drive like a VW. It too had issues like any other car – wiper motor seizing, front brakes warping, exhaust rotting out early, window gears shearing off, etc…

    The Acura dealer that is across the street from the VW dealer regularly has brand new trannies delivered for TL’s.

    Buy what you like. I just bought an Audi A3 S-Line. I guess I am a putz for paying more for a Golf ;).

  • avatar
    ash78

    tincanman99,

    The movement of particular industries and positions overseas is just a part of the natural migration of the value chain. The US still leads the way for much of the world in intellectual property (though I use this term very loosely!), software, finance, and basically all customer service industries. The fact that our export of hardgoods has been on a downward trend means very little in the modern economy.

    So to say that a business shouldn’t focus on profitability means that they’re either destined for failure and/or reliant upon some kind of subsidy for survival. Basic capitalism is a worldwide phenomenon, not an American-centric view. But that said, I’ve also mentioned elsewhere that I feel a lot of VW’s lack of success in the US is some kind of inherent sense of superiority (themselves) and disdain (Americans). They are #1 in most of the rest of the world, so it almost stands to reason that the US “just doesn’t get it.” Surely they can only look at the sales of bland, crappy cars from other manufacturers in the US before just throwing their hands up.

  • avatar
    kjc117

    One of VW’s biggest mistakes was to purchase Bugatti, Lambo, and Bentley. Just like BMW purchase of Land Rover Group and MB with Chrysler they lost their way got into doing something they are not good at and lost their focus.

    The time, energy, capital both human and financial to bring to these relics of the past to present day levels took VW almost into foreign ownership. Saved by Porsche VW needs to return to making the “people’s car” not bringing blasts from the past’s super cars up to date. Let me see Bugatti, Lambo. and Bentley survive without VW(Audi).

    When U.S. dealers were desperate for a mini van VW ignored them to produce Phaeton’s, Bugatti’s, Lambo’s. and Bentley’s.
    Despite the fact they had the fantastic Microbus concept on hand. So, now there are rumors of a VW minivan co developed with Daimler (Chrysler) but it’s too late. CUV’s are now in vogue but where is VW’s CUV?

    Honda, Toyota , Nissan, GM, Ford, Mazda, Subaru, even Hyundai are ahead of VW in the CUV market.

    Now the Golf is actually a good alternative to the Civic/Corolla/Focus/Mazda 3/Sentra/ Saturn Ion. VOA may call it a Rabbit but in reality it’s a Golf and a diesel Golf’s running on bio diesel would do more for VW sales than any stupid Rabbit/Golf model market scheme.

    Also, it is 2007 so VW has to address the whole inconsistent customer service and deal network.

    If VW is to get back on the right track it will be up to Porsche.

    Good Luck Porsche.

  • avatar
    Mike In Canada

    I respectfully disagree with tincanman99. Here is just one example of American “Best in Class” products – and they export too!

    http://www.atk.com/index.asp

    Talk about globalazation.

  • avatar

    Two substantial reads on VW, with lots of topical background information on where the company is today.
    I can’t help feel that the articles are somewhat unbalanced, though. Yes, the union and the Lower Saxony local government carry a lot of the responsibility for the peculiar business decisions of VW; but where’s management in this picture?

    VW is a strangeling as a business, since LS government, union heads and management have been sitting in one anothers’ laps (literally) for decades. It’s hard to see where one ends and the other begins.
    Nonetheless, VW has been the plaything of Piëch for far too long – and his strategy has been as full of holes as a rejected Edamer. He’s been playing corporate games to the point of lunacy, with other highly qualified top managers jumping ship after finding his Machiavellian machinations too ridiculous to accept.
    But how do you argue with a guy who has a 13% stake in Porsche and who’s in tight with everything that has clout in Germany?

    Google Piëch hunting for articles in German, and one of the words that will leap out at you is “Machtkampf” – powerstruggle. Well, this sandbox terror from childhood onwards turned VW into his own personal effing plaything, and the brand has suffered as a result. The war between Piëch and Pischetsrieder would have gone on to a launching of ICBMs if Piëch had been in possession of the launch protocol.
    Bribing everything in sight, VW has tried to stay its pending troubles by maneuvers instead of engineering. And it’s somewhat sad if VWs future is dependent upon Chinese manufacturing, the closing of German plants and a hope that the Chinese won’t nationalize their car industry one day. (Which they will, of course).
    While Piëch ran VW into the ground, BMW took off into the stratosphere. They have unions too.

    As you point out, Porsche is highly dependent upon VW for its parts, which gives some indication as to why they are securing a position in VW – but with Piëch in the mix don’t look for the cheese-full-of-holes strategy to suddenly find its way.

    Panamera, anyone?

  • avatar
    Thomas Minzenmay

    This came just in:
    Porsche has announced today that it’s willing to increase its stake in Volkswagen beyond 30%. This is important because German laws commit any shareholder whose stake exceeds 30% to make a mandatory offer to all the other stockholders. While Porsche announced that they’re “not willing to take over Volkswagen at this point,” they could end up with more than 50% of the stocks by the end of the year. It’s not the most likely scenario, but still very possible.

    @Stein X Leikanger
    You’re right about Volkswagen’s poor management in the past, but the main reason for that was, that management in Wolfsburg has always been strongly interweaved with politics. If you were/are member of the wrong party, you’re pretty much left out when it comes to promotions, even if you’re the best. And trying to move production out of Wolfsburg or reducing wages would have been virtually impossible up to now because there was no way the local government would have allowed that sort of thing.
    This is also the root of the bribery scandal that struck Germany last year. So while this is an intriguing side story, it wouldn’t have added to the points already made and only taken the space of other important issues.

    Piech on the other hand is a story of itself. I couldn’t possibly fit that into this piece (and again, it wouldn’t have added much to the points already made). But maybe there’ll be one on him some time in the future…

  • avatar
    wsn

    VW is very good at marketing and timing: they have 50% of US import market share at one point and had 60% of entire Chinese market share at one point.

    But VW is very poor at maintaining product quality and their market share advantage fades away. We all know that they lost the North American market.

    But how many of you realize that they are losing their Chinese market share fast? They was once No.1 at 60%. Now they are less than 30% and got surpassed by GM, and will be surpassed by Toyota soon. In the end, hype can only go so far, and product quality is the key.

  • avatar
    jthorner

    Perhaps VW will simply give up on the US market as all of the other European mid-market companies did. I highly doubt that over the past 30 years VW of America has turned a solid profit. They have had a few good years, but mostly struggled. It would be a shame to loose them from the US, but they seem more and more irrelevant all the time.

    The young tuner set is all over the Japanese car thing. Don’t try to tell those kids that a modified Civic has no soul.

    The past two times I went new car shopping I seriously considered the Passat, but the high trouble rates being reported, including some models being very susceptible to engine sludge when maintained as VW-USA recommended, turned me off.

    That said, VW isn’t in anything like the same position as the Detroit 2.5. VW still maintains strong share in it’s home market and in a number of developing markets. VW’s products are generally fuel efficient and fun to drive. VW has next to no investment in monster trucks for civilians, other than the silly SUV they and Porsche are building to milk the wallets of well off fools. Unlike GM and Ford, this isn’t their bread and butter product.

  • avatar
    fahrvergnugen11

    The past two times I went new car shopping I seriously considered the Passat, but the high trouble rates being reported, including some models being very susceptible to engine sludge when maintained as VW-USA recommended, turned me off.

    If these cars were maintained as VW AG recommended, sludge would not be an issue. VWoA dropped the ball on this one, big time….

  • avatar
    wsn

    Replying to fahrvergnugen11:
    If these cars were maintained as VW AG recommended, sludge would not be an issue. VWoA dropped the ball on this one, big time….

    People don’t run into too much trouble with their Toyotas, even if the cars are not maintained as Toyota recommended.

  • avatar
    vento97

    wsn:
    People don’t run into too much trouble with their Toyotas, even if the cars are not maintained as Toyota recommended.

    You obviously aren’t aware of the slugding issues Toyota just went through along with Chrysler and VW…

  • avatar
    vento97

    Replying to fahrvergnugen11:
    If these cars were maintained as VW AG recommended, sludge would not be an issue. VWoA dropped the ball on this one, big time….

    Where VW erred was not giving a tight enough oil specification. For years, they said something like “use 5W-40, but you can use 5W-30 if 5W-40 is not available”. So lots of owners and dealers put in 5W-30 conventional oil instead of 5W-40 oil (which requires at least a group III based oil, which is labeled as “synthetic” in the US). In 1.8T engines, that can result in sludge.

    To elaborate, VW AG’s oil specifications required synthetic oil in the 5W40 or 0W40 range, with the caveat that 5W30 could be used if the first two viscosities aren’t available. VWoA somehow implied that 5W30 conventional oil would be sufficient. To that end, many owners and dealers put in 5W-30 conventional oil instead of 5W-40 oil (which requires at least a group III based oil, which is labeled as “synthetic” in the US). In 1.8T engines, that can result in sludge.

    Therefore, VW dropped the ball (as far back as 1998) by not conveying to VWoA, their dealerships, and VW owners (in the strongest terms) that only synthetic oil must be used in the 1.8T engines.

  • avatar
    wsn

    Reply vento97:

    You obviously aren’t aware of the slugding issues Toyota just went through along with Chrysler and VW…

    No car is perfect. It’s just how they compare to each other. From my own experience, very few people complain about Toyota’s reliability. In real life I mean. So it’s not entirely perception, there is an actual flawless car behind the owner.

    BTW, engine sludge isn’t the only problem VW had. For a long time, VW had faulty auto transmission and falling down power windows on many of their cars. Blaming them on the service guys?

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