MOTOR MATTERS FREEWHEELING BY BILL VISNIC
Look out Toyota. That’s Volkswagen in your rearview mirror. Auto industry pundits had a polite chuckle back in 2007 when incoming Volkswagen CEO Martin Winterkorn voiced a corporate ambition to become the No. 1 global automaker by 2018, surpassing both a thriving Toyota and a weakened General Motors.
Most experts blew off the pronouncement as hubris. Proclamations of lofty corporate ambitions from the new CEO are a part of German corporate culture. Winterkorn and Volkswagen hung in, despite the scoffing.
The company insisted it would sell 10 million vehicles worldwide by 2018. A linchpin in reaching that goal: bolstering its U.S. sales performance, which has sagged for years. In 2007 when the plan that subsequently became known as Strategy 2018 was made public, Volkswagen’s U.S. sales totaled 230,000 vehicles. Strategy 2018 dictates that the company raise that figure to 800,000.
This seemed quite preposterous nearly four years ago — long before GM’s bankruptcy and wholesale restructuring and before anyone was forecasting the recession. And before the colossal corporate stumble of Toyota in 2010 that made the Japanese automotive juggernaut look not so invincible after all.
All these events helped reshuffle the automotive world order with previously unimaginable speed. Suddenly, auto industry analysts aren’t so dismissive about the potential for VW to pull off Strategy 2018 and sit at the top of the heap within the next seven years.
This prospect has been buoyed further with the announcement of VW’S 2010 earnings. The company has emerged from the global recession looking like the dominant force it believes it can be.
To start, VW sold 7.2 million worldwide last year, a new record. That figure suddenly makes Strategy 2018’s dream of 10 million sales seem not so outlandish.
Equally important, the company is building a war chest of funds with which to deploy the new products that are so vital to sustaining growth in the auto business. Last year, VW earned a before-tax operating profit of $12.8 billion, another record, and its automotive division has an enormous $25.8 billion of liquidity at its disposal.
Combine the ambition of Strategy 2018 with these vast funding reserves and we can expect a torrent of new products from Volkswagen, not to mention its Audi premium-car division plus Porsche, which it now also owns (although there’s some legal work yet to pass on that deal).
We’ll see a production version of the fascinating Bulli concept car, the new-age version of the beloved Microbus that VW unveiled at the recent Geneva motor show; we’ll get even more interesting Audi models to expand that brand’s already lust-inducing lineup; we’ll benefit from the immense technical knowledge Volkswagen is deploying to improve fuel efficiency and we’ll see a fascinating generation of new Porsches that similarly leverage VW’s deep research-and-development resources.
And expect much of this to happen right under our noses: VW is just now getting ready to pump out the first new-generation Passat midsize sedans from its gleaming new assembly plant in Chattanooga, Tenn. That plant can easily be doubled in size, an event that’s almost certain to happen as VW steams towards achieving the targets of Strategy 2018 that not long ago provoked such amusement. — Bill Visnic, Motor Matters
Copyright, AutoWriters Associates Inc., 2011