Volkswagen Aims for No. 1
Globally, Volkswagen trails only Toyota and General Motors in terms of market share, and the German company is on a mission to move up in the standings. In fact, through the first half of this year, VW saw its share of the international market climb more than 2 points as compared to the first half of 2008, and it's now sitting at the 12 percent mark.
Unfortunately, that's about 10 points higher than Volkswagen's share of the U.S. market, which is hovering down around 2 percent '” and even that represents a 25 percent increase in comparison to the same time last year.
If the company can just bring its U.S. share in line with its global share, it will become the new king of the world. And, as one would expect in the auto industry, VW's strategy for achieving this is to simply start spreading its resources too thin in a desperate attempt to enter more segments without apparent regard for profitability or common sense. Except that instead of only adding new models, VW is also adding a whole new nameplate '” Porsche.
Porsche and VW share a long, tangled history, much of it pretty ugly. Things came to their natural conclusion recently when the companies "merged"'”you know, kind of like Daimler and Chrysler. Of course, this only happened after Porsche mortgaged off a big chunk of its future as it tried to take control of VW.
The net result: The VW group now controls Porsche, Audi, Lamborghini, Bugatti and Bentley, in addition to non-U.S. players SEAT and Skoda. That's three exotic supercar nameplates and a muddled German version of the classic Chevrolet-Buick-Cadillac ladder.
To avoid intra-corporate competition, Volkswagen is already axing the Porsche Cayenne SUV and Panamera sedan so that the Stuttgart contingent can focus solely on sports cars. On the other hand, even though the Cayenne shares much of its underpinnings with the Audi Q7 and VW Touareg, it was still Porsche's top seller. As for the Panamera, which is just now reaching the marketplace, this decision means all the money Porsche poured into the sedan has essentially been wasted.
Plus, the Audi TT and R8 are still going to be competing for customers with the Porsche Boxster, Cayman and 911 variations. And VW and Audi will still be competing against each other at the borderline between more premium Volkswagens like the CC and GTI and entry-level-ish Audis like the A4 and A3.
And at a time when companies like Ford are moving to global vehicle platforms to cut costs, a recent news story from "Consumer Reports" shows Volkswagen looking in the other direction. In discussing both the new Jetta (expected in 2011) and a possible sub-Rabbit car based on the Polo, Stefan Jacoby, CEO of Volkswagen North America, made it clear that the U.S. vehicles will have to grow compared to their European counterparts to be successful here. And every change in dimensions means less commonality, which means less efficiency and fewer profits.
Then there's the quality issue. The Volkswagen brand, obviously, is the VW Group's bread and butter. But most U.S. customers consider its quality to be on par with stale toast and rancid margarine. Witness the two August recalls dealing with VW's direct-shift gearboxes (which includes Audi vehicles, too). Now, more of the money that could have been used to improve quality issues like these will go toward trying to differentiate vehicle brands that aren't always that different.
Think of it this way: The VW Jetta TDI gets a combined 34 mpg from the EPA, trumping every mainstream vehicle on the market except for the three top hybrids (Toyota Prius, Honda Insight, Ford Fusion). But where's the VW support for the vehicle? Well, it's being spent buying Porsche.
It's interesting: General Motors spent 77 years as the biggest automaker in the world before its slow-motion train wreck ground to a stop (one hopes) in bankruptcy court. Toyota then ascended to the top of the mountain, a position from which it promptly began losing billions of dollars. Now, in a situation that almost seems to defy the laws of physics, it looks like Volkswagen just might implode at the exact same time it gets to the top of the heap.