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11-09-2006, 07:02 AM
#11
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I totally disagree - Piech is who screwed up VW by trying to move it upmarket....
Winterkorn is his puppet. So in essence - Piech is back in control now. Look for more Phaeton style disasters. This is overall bad news for the brand because it throws it back into disarray.
11-09-2006, 09:34 AM
#17
I disagree...
I agree with your statement about Piech attempting to move VW upmarket, but the reality of this move is often never fully discussed, or even fully understood, by industry analysts. The auto industry is fragmenting into two distinct sectors-low cost and premium.
The low cost segment will be dominated by Chinese, and potentially, Indian manufacturers. Lower labor costs and corresponding lower material costs will force production away from the U.S., Korea, Mexico and Eastern Europe. The world is increasing becoming more and more affluent and huge numbers of Chinese and Indians will soon have enough income to purchase automobiles, albeit at relatively low pricing points
The industry also is seeing the ramp-up of the premium and the super premium brands. Look at the current sales growth of Audi, BMW, Mercedes-Benz, Bentley, Aston-Martin, Ferrari and Lamborghini. This market segment is growing throughout the world. Ferrari is increasing production with increased sales in Russia and China, yet the U.S. sales numbers will remain relatively flat to maintain exclusivity.
However, the future is not positive for the mass market manufacturers resulting in consolidation and/or some players exiting the marketplace. Ford and GM are falling victim to the decline in the middle-class market segment. Financing options make premium vehicles affordable to those that only a few years ago could afford a typical middle class car. Piech understands the changing market dynamics and wants VW to move upward instead of falling by the wayside.
VW is also uniquely saddled with issues that few automakers face. The government of Lower Saxony is a major shareholder and it limits the options available to VW in terms of controlling labor costs. The government is interested in job preservation, not increasing shareholder value. This is why VW has proposed moving jobs back to high labor cost German factories versus lower labor cost locations. The German facilities have low utilization rates and need increased production levels to cover the high fixed and variable operating costs. One way to attain this arduous goal is to increase the profit margin per vehicle, in short, adopting a premium pricing strategy.
Toyota and the other Japanese makers followed a similar strategy during the 1980's in the United States. The Japanese automakers, in the Reagan era, agreed to voluntary sales quotas for the U.S. market. This was not restriction on price, only volume. To increase profit margins, and consequently profits, the Japanese makers introduced luxury brands. And we know the rest of the story.
I will not deny that Piech does not have an emotional tie to VW. After all, his grandfather virtually created VW, or the "People's Car." He is motivated not by wealth, he is very wealthy, but by a strong desire to have VW become strong and prosperous. I guess if my grandfather had started VW, I too, would be willing to work hard to make that company successful.
The low cost segment will be dominated by Chinese, and potentially, Indian manufacturers. Lower labor costs and corresponding lower material costs will force production away from the U.S., Korea, Mexico and Eastern Europe. The world is increasing becoming more and more affluent and huge numbers of Chinese and Indians will soon have enough income to purchase automobiles, albeit at relatively low pricing points
The industry also is seeing the ramp-up of the premium and the super premium brands. Look at the current sales growth of Audi, BMW, Mercedes-Benz, Bentley, Aston-Martin, Ferrari and Lamborghini. This market segment is growing throughout the world. Ferrari is increasing production with increased sales in Russia and China, yet the U.S. sales numbers will remain relatively flat to maintain exclusivity.
However, the future is not positive for the mass market manufacturers resulting in consolidation and/or some players exiting the marketplace. Ford and GM are falling victim to the decline in the middle-class market segment. Financing options make premium vehicles affordable to those that only a few years ago could afford a typical middle class car. Piech understands the changing market dynamics and wants VW to move upward instead of falling by the wayside.
VW is also uniquely saddled with issues that few automakers face. The government of Lower Saxony is a major shareholder and it limits the options available to VW in terms of controlling labor costs. The government is interested in job preservation, not increasing shareholder value. This is why VW has proposed moving jobs back to high labor cost German factories versus lower labor cost locations. The German facilities have low utilization rates and need increased production levels to cover the high fixed and variable operating costs. One way to attain this arduous goal is to increase the profit margin per vehicle, in short, adopting a premium pricing strategy.
Toyota and the other Japanese makers followed a similar strategy during the 1980's in the United States. The Japanese automakers, in the Reagan era, agreed to voluntary sales quotas for the U.S. market. This was not restriction on price, only volume. To increase profit margins, and consequently profits, the Japanese makers introduced luxury brands. And we know the rest of the story.
I will not deny that Piech does not have an emotional tie to VW. After all, his grandfather virtually created VW, or the "People's Car." He is motivated not by wealth, he is very wealthy, but by a strong desire to have VW become strong and prosperous. I guess if my grandfather had started VW, I too, would be willing to work hard to make that company successful.
11-09-2006, 10:51 AM
#18
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The bottom line is VW is again is disarray not knowing what it wants to be...
it will NEVER be a premium brand - period. It has still failed to solve it's quality issues and dealer network issues. The Phaeton was a failure and the Touareg didn't fair nearly as well as they had hoped. As they continue to try and figure out what they want to be - products get delayed (B6 Passat, new Golf etc.) and the other players continue to take away their market share.
Simply charging more for their products wont' work - especially when they continue to hold down the bottom of the JD powers quality list.
Simply charging more for their products wont' work - especially when they continue to hold down the bottom of the JD powers quality list.
11-09-2006, 11:43 AM
#19
Simply a myopic view
Why is it most Americans focus solely on the situation in the United States?
I suggest you review "Premium Power: The Secret Success of Mercedes-Benz, BMW, Porsche and Audi" by Philipp G. Rosengarten and Christoph B. Stuermer for an indepth analysis of the global brand positioning of VW. If VW does not have any (semi-) premium brand cachet in the U.S. why is it a common target of Bob Lutz? Mr. Lutz has often stated that "comparable" models from VW achieve higher prices than the corresponding GM model and he has set VW as a benchmarking target. Ford, too, has set VW as a benchmarking target.
I suggest you review "Premium Power: The Secret Success of Mercedes-Benz, BMW, Porsche and Audi" by Philipp G. Rosengarten and Christoph B. Stuermer for an indepth analysis of the global brand positioning of VW. If VW does not have any (semi-) premium brand cachet in the U.S. why is it a common target of Bob Lutz? Mr. Lutz has often stated that "comparable" models from VW achieve higher prices than the corresponding GM model and he has set VW as a benchmarking target. Ford, too, has set VW as a benchmarking target.
