Volkswagen: Empire Under Construction

by Bertel Schmitt

Published: May 4th, 2011

At yesterday’s annual shareholder meeting, Volkswagen had nothing but good news: A record year 2010, a record first quarter 2011, a company that is rolling in cash. Instead of thanking management for the good numbers and the (smaller than expected) dividend, ingrate shareholders bawled Winterkorn out.

When will Porsche finally and officially come under Volkswagen’s roof?
What’s the matter with Scania and MAN?
And where are the fruits of Volkswagen’s engagement with Suzuki?

In the mergers and acquisitions department, Volkswagen has a lot of unfinished business, or “construction sites” as they call it in VW-speak.

Especially with Suzuki, Volkswagen appears to be treading water. At the end of 2009, Volkswagen spent €1.7 billion to buy a 19.9 percent stake in Suzuki. Tangible results have yet to emerge from the tie-up. Winterkorn’s comments sounded like Volkswagen is on the retreat.

Reporters of The Nikkei [sub] took copious notes when Winterkorn said that “certain aspects of our cooperation with Suzuki are developing more slowly than originally anticipated.”

Winterkorn said that “a whole range of attractive opportunities for cooperation, for instance in procurement, have emerged.” It’s always a bad sign when a partnership degenerates to buying parts together (which usually doesn’t work out anyway.) Winterkorn said that the two are focusing on “the small-car segment in India in particular.” Suzuki owns that market and is unlikely to give it away.

Winterkorn told shareholders they would not be hurt even if the tie-up with Suzuki does not move forward. “Overall, we can say that our investment in Suzuki is paying off — not least because Suzuki is an excellently managed company that makes good money.” That’s not a good sign. A car company usually doesn’t invest in another car company just to collect dividends.

#BertelSchmitt #Germany #Japan #MAN #SCANIA #Suzuki #Volkswagen

Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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2 of 14 comments

Philadlj on May 04, 2011
Suzuki owns [the Indian] market and is unlikely to give it away. Yes, but VW owns 19.9% of Suzuki. There may not be that much collaboration yet, but the fact remains, VW owns 19.9% of the dominant automaker in India, a market no one should ignore.

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Cole on May 04, 2011

That's not a car factory, is it? An office building? Power plant? Edit: saw the hover-caption. That was my first guess.

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