VW Giving "Spanish Pontiac" One Last Chance
Whenever TTAC took GM to task for branding run amok and excessive platform sharing, the example of Volkswagen has always been the key counterfactual. With seven brands available in Europe, the Volkswagen-Audi group is the continental GM, always looking for another way to repackage a pedestrian FWD platform. The only difference is that VW has actually been growing. But Wolfsburg’s brand profligacy is starting to bear some GM-style bitter fruit. Skoda has been surprisingly strong of late, actually making problems for the Volkswagen brand in certain markets. Seat, on the other hand, is not doing so well. With only one factory, at Martorell, near Barcelona, Seat has always been a slightly niche player, offering older VW designs with some Pontiac-style “emotional” styling flair and a sportier image. The problem now, as Seat CEO James Muir tells The WSJ [sub], is that
The brand really is too small for this plant
Running at only 60 percent of its 500,000 unit capacity, Seat is too small for its lone plant. As a result, VW is launching a last-ditch effort to save its dying brand.
And make no mistake, the rescue of Seat is a last-chance effort. Muir explains
I think this is the last attempt for the brand. It wouldn’t make sense to think something else. If one would want to get rid of Seat, one would have to give the other party money to take it.
Seat lost about $430m last year, as sales dropped eight percent to 337,000 units, according to BusinessWeek. So, what’s the problem? The European market is projected to contract this year, and Seat isn’t just VW’s weakest brand… it’s one of the weakest brands in Europe. Sales in Seat’s main market, Spain, fell 21 percent last year, and the other Southern European markets where Seat is popular haven’t fared well lately either. And outside of being a Volkswagen for those vulnerable Mediterranean markets, it’s not clear what Seat is supposed to mean to anyone else. Mike Tyndall, an automotive analyst at Nomura Securities in London, explains
It seems to me that VW hasn’t fully committed itself yet to the brand image of Seat. At some point they wanted Seat to be the sporty brand within the VW family, but some of the model decisions don’t add up
So what’s the plan to rescue this weakened and increasingly irrelevant brand? According to CEO Muir
Our clear focus over the next three years will be to improve utilization. One cannot solely rely on cost reductions to make Seat profitable
That means building the Audi Q3 compact crossover in Martorell, and boosting sales of Seat’s Golf-based Leon from 75k units to 200k units by adding more variants. Currently at nine models, Seat plans on increasing its number of nameplates to 40 by 2018. More fleet business is also in the cards.
And though overcapacity of the kind that’s bringing down Seat is a distinctively European problem, the brand’s troubles are more than a little reminiscent of Pontiacs. Skoda competes with Seat in the budget-VW category, and does so consistently better across Europe. Seat is supposed to be the “sporty Volkswagen” brand, but it must compete with GTIs and Skoda RS models. And despite struggling with geographic limitations to its appeal, VW thinks it can solve the brands problems by boosting volume and nameplates. As we all know by now, taking a sporty brand into the mass-market with more models and more fleet sales is a classic technique for destroying its last vestiges of authentic appeal. Just ask the Pontiac G6. Keeping Seat alive is just another step for Volkswagen down the path towards General Motors-dom.
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