Volkswagen develops 5 splitting headaches

Winterkorn in Beijing - Picture courtesy Bertel Schmitt

I brauch an Aspirin

In all of 2014, Toyota was 145,546 units ahead of Volkswagen. In January, the lead narrowed to a very skinny 10,457. All signs point to Volkswagen taking the top spot this year, especially when one considers Toyota’s obstinate refusal to grow while Volkswagen pours a hundred billion dollars into expansion. A victory at what costs? Germany’s influential Spiegel Magazine found five pounding problems in Wolfsburg:

  1. Low profits at Volkswagen Passenger Vehicles. A margin of just two percent at the core and volume brand in VW AG’s collection is extremely low and dangerous. “Analysts of Morgan Stanley estimate profits of Renault’s discount brand Dacia at 9 percent,” Der Spiegel trolls. Elsewhere, making SUVs is printing money. At Volkswagen, the new Tiguan and Tuareg models could be losing money.
  2. Weakness in America. Passat sales are limping. Tuareg and Cross Blue could be too expensive to make a difference, Der Spiegel says.
  3. Kits don’t bring the promised savings. MQB and MLB were touted to save up to 30 percent. False promises so far. Production and logistics became more complex instead.
  4. Cannibalism. Cheaper Skoda cars take away sales from Volkswagen. The up-positioning of Volkswagen is running into resistance.
  5. Winterkorn succession. The contract of the current Volkswagen CEO expires by the end of next year. Who’s next? Renschler? Diess? The current hot favorite is Audi chief Rupert Stadler. He is close to Ferdinand Piech, he was his assistant, and remains a close confidante. Skoda chief Vahland is a dark horse with little chances. He seems to be in the race only to make Stadler look better.

While Winterkorn is digging for Tylenol, Toyota is set to report record 2.4 trillion yen ($20 billion) profits for the year, despite, or make that because it no longer wants to grow at all costs. By the end of this fiscal, Toyota is expected to lift, at least partially, the veil off its new production system, dubbed Toyota New Global Architecture, or TNGA. Expect this to be much more than just a modular kit. TNGA will reach into all aspects of the vehicle development and production process, including planning, design, and purchasing. TNGA will extend across diverse divisions, including R&D, Sales, Purchasing, and Production Engineering. Instead of a Teutonic “out with the old, in with the (costly) new” TNGA will maximize current resources and investments, and it will be gradually implemented over the course of a decade. At Toyota, TNGA could very well be the most ground-breaking development since the Toyota Way.