Volkswagen's America Chief: This Country Needs To Get Its House In Order

Bertel Schmitt
by Bertel Schmitt
According to VW USA’s CEO Jonathan Browning, America is missing out on huge investments and new jobs due to our “rising debt and political discord.” In 1999, the U.S. did attract 41 percent of all global foreign direct investment. Now, the number is less than 20 percent. The money is going to places like China where Volkswagen has 12 plants and three more on the way, while there is only one in the U.S. Browning is talking in code about several facts of post-bailout automotive life.1) Union TroubleVolkswagen is the last major automaker to build a new plant in the US. The UAW has been targeting it for organization since it opened for business. Neither VW nor its workers want the UAW around, even its German unions want to keep the UAW away, and yet the UAW pushes on. The result: Audi production that was supposed to be added to Chattanooga is going to Mexico. Still, the UAW has continued to push for unionization at Chattanooga, even into this year.2.) ProtectionismLargely prodded by labor unions, the Obama administration has embarked on a world trade war. This war is financed out of the pockets of consumers, it has not added a single job, and prevented many from being created . OEMs favor Mexico over the U.S., also because Mexico has trade pacts with major export markets, the U.S. has not. The pandering to union interests costs jobs and kills exports.3) CAFE/EV CreditsWhereas GM’s DC Rep has cheerfully admitted that, for some strange reason, the latest round of CAFE negotiations were notable for their unprecedented cordiality and pulling-togetherishness, Volkswagen has been openly unhappy with the new rules, accusing them of being unfair, favoring truck makers (read: Detroit) and not technology neutral.Interestingly, VW’s reasonable quibbles with environmental policy in both the US and Europe have earned it a long campaign of attacks from Greenpeace. Nobody has been able to explain why VW has been targeted by Greenpeace, as there’s no objective environmental reason for doing so. Conspiracy theories, anyone?Upshot: Not only is VW not going to bring new Audi production to the US, it won’t build its next-generation Golf here either… both are going to Mexico. And this isn’t just a business decision: they say capacity in Chattanooga is “exhausted,” but it absolutely is not. I’ve been there, I’ve seen it, they have room to add entire new lines there. No way would they rather use their ancient Puebla plant rather than their shiny-gleaming new Chattanooga plant, all things being equal.The business climate must be very rotten if a country embroiled in a shooting war with heavily armed gangs and sometimes rogue military elements is favored over a country that used to be proud of its enterprise spirit. The armed gangs seem to scare investors less than union thugs with friends in high places.
Comments
Join the conversation
2 of 41 comments
  • Bd2 Bd2 on Oct 04, 2012

    Kind of ironic coming from an automaker based in a country where labor unions are stronger and is more protectionist (10% tariff on auto imports). VW is making good $$ on US-built Jetta and Passat sales even tho VW has been discounting them, as well as selling to fleet - since production costs for them are so low (lower than the Koreans or Japanese in the US). All this talk about Mexico is simply b/c the wages there are even cheaper but more importantly, much more conducive for exports to other markets (including to Europe) due to the FTAs. So a Mexican-built Audi means more profit selling to the US and Europe, as well as to countries in S. America. Same reason why Apple makes its stuff in China opposed to the US; turn what would be good profit margins into spectacular margins.

  • Mike Kelley Mike Kelley on Oct 06, 2012

    These days, Mexico's economy is more vibrant than our own, and the US now has the highest corporate taxes in the world. Throw in Sarbanes/Oxley and Dodd-Frank, and you would have to be crazy to pick this country for your new factory. I remember the tech executive who said it would cost a billion bucks more to build a chip plant in California than overseas. The US is now toxic to business, and we are seeing the effects every day.

  • Probert There's something wrong with that chart. The 9 month numbers for Tesla, in the chart, are closer to Tesla's Q3 numbers. They delivered 343,830 cars in q3 and YoY it is a 40% increase. They sold 363,830 but deliveries were slowed at the end of the quarter - no cars in inventory. For the past 9 months the total sold is 929,910 . So very good performance considering a major shutdown for about a month in China (Covid, factory revamp). Not sure if the chart is also inaccurate for other makers.
  • ToolGuy "...overall length grew only fractionally, from 187.6” in 1994 to 198.7” in 1995."Something very wrong with that sentence. I believe you just overstated the length by 11 inches.
  • ToolGuy There is no level of markup on the Jeep Wrangler which would not be justified or would make it any less desirable [perfectly inelastic demand, i.e., 'I want one']. Source: My 21-year-old daughter.
  • ToolGuy Strong performance from Fiat.
  • Inside Looking Out GM is like America, it does the right thing only after trying everything else.  As General Motors goes, so goes America.
Next