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The new Volkswagen Golf is unveiled in Berlin in this file photo taken September 4, 2012. Volkswagen’s fundamental rethink of vehicle platforms is helping power the German auto maker to the top of the global sales league table several years ahead of its 2018 target. (FABRIZIO BENSCH/REUTERS)
The new Volkswagen Golf is unveiled in Berlin in this file photo taken September 4, 2012. Volkswagen’s fundamental rethink of vehicle platforms is helping power the German auto maker to the top of the global sales league table several years ahead of its 2018 target. (FABRIZIO BENSCH/REUTERS)

Volkswagen's mega-platform strategy the Holy Grail of car makers Add to ...

The company was an early investor in China and the only European auto maker to form joint ventures with that country’s top two manufacturers, FAW Group and Shanghai Auto.

Now, China accounts for 30 per cent of VW’s global sales. The German group operates 10 assembly/component factories in China and plans to pump another $13-billion with its JV partners over the next three years into plants, equipment and models.

Excess exposure to a single market such as China contradicts VW’s philosophy of spreading growth evenly and potentially makes it vulnerable to negative market developments and possible government interference, says Pieper.

To hedge its potential emerging-markets exposure, VW also has overhauled its loss-making North American operations - an estimated $4-billion investment, according to Morgan Stanley, that could more than double U.S. sales by 2018 to 1.3 million.

Even then, it would remain a mid-level player in the U.S. market dominated by GM and Ford, which sell nearly 5 million vehicles a year between them.

VW is supporting its recent growth spurt with additional production capacity, including a new Audi assembly plant in Mexico, expansion of VW’s existing facility in Puebla and a potential increase at the new Chattanooga plant in Tennessee.

The latter two plants will be updated to accommodate new models that use the MQB platform - the latest Golf in Puebla and the big crossover in Chattanooga, according to VW executives.

Top managers are scanning other overseas markets where the company lacks local production facilities, including Africa, much of Latin America and most of the ASEAN region, where VW’s modest presence is dwarfed by that of market leader Toyota.

VW is in the process of boosting global capacity, including the investments in China and the United States, to nearly 12 million by 2015, from 8.6 million in 2010, according to Morgan Stanley.

CHANGING OF THE GUARD

The full rollout of MQB may not be accomplished until the end of the decade, estimates Pearson. By then, the chief stewards of VW’s corporate strategy - CEO Winterkorn and Chairman Ferdinand Piech - may be retired and the next generation of management moved into the top slots.

The Austrian-born Piech, 75, is a third-generation auto executive. A mechanical engineer by training, he is the grandson of Ferdinand Porsche, the legendary Austrian designer of the original VW Beetle.

VW’s supervisory board has yet to clearly anoint potential heirs to Piech and Winterkorn, 65, and it won’t be easy, particularly since much of the power has been closely held by the two patriarchs since Winterkorn became CEO in 2007.

As for the company’s strategic vision after Piech steps down, Morgan Stanley’s Pearson says: “His legacy is (building) the world’s largest and most successful auto company. I don’t think the strategy will change any time soon.”

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