How VW is run like GM used to be, operates like no other carmaker today

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Thread: How VW is run like GM used to be, operates like no other carmaker today

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    GMI Staff Member Premium Member nadepalma's Avatar
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    How VW is run like GM used to be, operates like no other carmaker today

    How Volkswagen is run like no other car company
    By John McElroy
    Dec 6th 2012

    Volkswagen is run very differently than every other automaker. Actually, its corporate structure looks more like General Motors did from 1920 to 1970. In other words, VW now looks like the GM that was once the largest and most profitable corporation in the world.

    VW is not in any danger of having other automakers copying its corporate structure. Most are unaware of VW's modus operandi, and besides, by traditional business school metrics, VW looks like a productivity basket case.

    Any efficiency expert would tell you that VW is too vertically integrated, has too much overlap and duplication, and has way too many brands. VW, meanwhile, keeps growing bigger, stronger and more profitable.

    The give-away that Volkswagen Group is run differently from every other car company lies with the fact that it employs a staggering 549,300 people globally. Fortune magazine lists it as the eighth largest employer in the world, behind giants such as Walmart and the Chinese post office. VW has almost as many full-time employees as General Motors (213,000), Ford (164,000) and Fiat-Chrysler (197,000) put together. While those three behemoths collectively built 19 million vehicles last year, VW "only" built 8.5 million.

    CONTINUE READING AT: http://www.autoblog.com/2012/12/06/h...r-car-company/
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    GMI Staff Writer Premium Member ausrutherford's Avatar
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    Re: How VW is run like GM used to be, operates like no other carmaker today

    VW is truly the model GM should go after...but for some reason (pig-headedness, ignorance?) won't.
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    Re: How VW is run like GM used to be, operates like no other carmaker today

    I've said it a MILLION times, and I'll say it once more: THE ANSWER TO GM'S PROBLEM IS NOT, AND NEVER WAS, CUTTING BRANDS.

    GM never had too many brands... They simply FAILED to leverage those brands to attack the market correctly. GM wanted 5 of their 13 brands to compete for the EXACT SAME BUYER. Meanwhile, their products weren't good enough to even be mid-pack. The result is that 3 of those brands (and many more valuable assets) are now gone.

    Even today, in an age where General Motors Company promised us distinct brands with separate identities, we have terrible marketing and numerous offerings for the SAME three areas of the market. It's sad, really.... It's as if GM doesn't even care about being a major force in the market these days... What happened to the fire? What happened to the "29" lapel pins? (I'm talking attitude, not incentives -- so shut up before you even open your mouth) What happened to walking tall and carrying a big stick?

    I guess GM will be the next Nissan or Honda.

    I've always been a proud import hater, on principle (and I don't really give a damn what anyone thinks about that either) but I sincerely wish VW the best with this plan. Just so they can prove it can be done. They currently have some awesome products, so I think they definitely have the momentum.

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    I wonder how they can keep on making this much money with this many employees, would be nice if GM could employee this many and still be very profitable.

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    Great article and absolutley spot-on on what is wrong with the new GM!

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    Quote Originally Posted by georgewerr View Post
    I wonder how they can keep on making this much money with this many employees, would be nice if GM could employee this many and still be very profitable.
    As long as Porsche can sell $200k Cayennes on the same platform as a $40k Touareg. (Just an example, but many more)
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    Re: How VW is run like GM used to be, operates like no other carmaker today

    "GM's vaunted president and chairman, Alfred Sloan, who led the company from 1923 to 1956, always fought against centralized operations. He kept GM very decentralized until the day he retired. Then the MBAs got ahold of it. In the 1960s they started implementing "efficiencies" and "synergies" and it's been downhill ever since. Their top-down, command-and-control system of management simply choked the company. It still does.

    Meanwhile, VW is operating right out of the Sloan handbook. And its corporate structure gives it an enormous competitive advantage. No matter how much VW's competitors try to rationalize, cut cost, outsource, or partner up with one another, they're never going to overcome VW's advantage. I wonder how many of VW's competitors are even aware of what they're up against."
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    Re: How VW is run like GM used to be, operates like no other carmaker today

    In my opinion, it's all about the intangibles of the business.

    Back when GM was at its greatest, they did what FELT right. They did things because they were COMPELLED. I mean, sure... Someone has to keep an eye on profit and make sure the company isn't making stupid decisions, but business (like all things) is NOT 100% black and white.

    The predominant mindset at the big two (and in this country in general) is "money, money, money!!!!!! NOW!!!" It's all about black and white numbers and unless something performs exactly to the plan, it's not of any value. That might work with nuts, bolts and nails; but when it comes to MAJOR purchase decisions which are EMOTIONAL purchases, that logic is very flawed.

    (BTW, this whole conversation directly relates to my rants about the Cadillac Sixteen a few weeks ago)

    EXAMPLES of what I'm talking about:

    1) VW looks at Lambo and says "Hmm.... A legendary maker of sports cars that probably isn't that profitable but is still super cool, will benefit us on a technological front and will benefit us in amazing ways when it comes to cachet and PR... SOLD!"
    GM would look at Lambo and say "Hmm... A legendary maker of sports cars that isn't profitable anymore. Well, our customers are too stupid to associate it with our other brands if we buy it. (which is a good thing because we've trashed all of our brands reputations) Its customers obviously don't matter because its not making money. If we buy it, we can introduce models X,Y and Z (heavily based on already established GM models) to create volume and make it profitable. And eventually we'll be turning out 250,000 Lambos a year, at a PREMIUM to the Chevies they're based on, and the customers will never know the difference! SOLD!"

    LESSON: It's not always about money... VW understands that and they have grown their luxury brands into powerhouses because of it.

    2) As a Pontiac lover, I probably would not buy from GM at this point. That's not because I'm delusional enough to think Pontiac was still its own entity, it's because Pontiac had an amazing history (like all of the American brands) and what GM PROMISED ME Pontiac would become is exactly what I identify with. You see, I'm an enthusiast... Not an enthusiast like people who go to GMI or AutoGuide to see the latest review on the Buick Verano; an enthusiast like I LIVE CARS, my car is a large part of who I am and I enjoy the CULTURE of my car. At this point, the ONLY GM brand that offers anything remotely exciting is Chevrolet (for my group of buyer) and that's not saying much given their current stable of tepid cars. Problem is, I don't want to buy the same anemic Sonic as 45,000 other people. And why the hell would I when I can walk into a Mini, Subaru or Scion dealer and buy a lifestyle/image (Scion is ONLY failing because Toyota has starved it of product and marketing).

    LESSON: Brands and products have EMOTIONAL value. It's an intangible that Detroit used to be AMAZING with, yet COMPLETELY overlooks these days. (for the most part) Need proof? Look at the Chrysler 200. Fiat polished a turd up, gave it COMPELLING, heartfelt marketing that appeals to people's identity and emotions, and the thing is selling like hot cakes! VW has HUGE cachet right now... Many people have fond memories of types 1s and type 2s and, unlike Detroit, the company isn't afraid of its history. In fact, I can even make the argument that Detroit's unwillingness to ACCEPT their history, and FULFILL the role many people still romanticize about, is actually HINDERING them.

    BTW, how ironic is it that an Italian company had to come in and prod Chrysler enough about its proud heritage that it finally developed COMPELLING marketing? That's hella sad...

    3) AND MOST IMPORTANTLY: There cannot be a TIME FRAME on anything...... I'm gonna go ahead and go on record as saying the Lincoln renaissance will fail (Sadly... IMO, the new MKZ is one of the most striking cars I've seen in a long time) The reason is: BEFORE the renaissance has even gotten off the ground, people at Ford HQ are already talking **** about shutting the brand down if it doesn't perform. 1) That's already sending a terrible message to potential buyers. And 2) Lincoln is a TERRIBLY DAMAGED brand that will take YEARS to straighten out. If Ford isn't willing to SERIOUSLY BUILD a new Lincoln luxury brand from the ground up, they need to just cut their loses now. Fostering a healthy brand image (ESPECIALLY for damaged and equally hallowed Detroit brands) is a LONG-TERM process that takes commitment, money and a willingness to work extremely hard and stick to a plan. Do Ford executives think Audi re-launched 15 times and VW only committed $5 and negative comments to their revival after the parking brake debacle (that almost killed the brand)? Do Ford executives think Nissan executives transformed Infiniti from the butt of jokes into a contender is 24 months?

    We've all seen this results-fueled, short-term Detroit schizophrenia before... Saturn wasn't even given a complete product cycle (or adequate marketing) to pull miracles out of its ass. Pontiac was said to be one thing, supposed to be another and ended up something else, to the point that it was a joke (even within the company) Oldsmobile was completely transformed into something it wasn't, and expected to perform like what it initially was. And Mercury was starved (based on numbers) for so long that it DIDN'T EVEN HAVE AN IDENTITY... It was literally a 'forgotten' brands for most people. (Which, as I've said before, was a HUGE asset Ford squandered).

    LESSON: Rome wasn't built overnight, and neither is a reputable automotive empire.
    Last edited by FUTURE_OF_GM; 12-08-2012 at 07:59 PM.

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    I see everyone is jumping on the VW bandwagon because the article says to. The structure does work, to an extent. I suspect it will work fine until another competitor takes a large bite out of VW's market share, then their structure will crumble. VW's structure requires either constant growth or a minimum of flat volume. Any declines in their market share will cause costs to go way up. And if the decline in market share occurs, guess what? They will start to look for effeciencies....
    Last edited by BlackGTP; 12-08-2012 at 07:56 PM.

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    The simple fact is that shared platforms do not detract form the business because the brands are still seen as different to VW even though they are part of the VW group
    VW, Seat, Skoda, Audi, Porsche...I'm sure there's one or two more but it's a carefully crafted suite of vehicles to diversify VW's footprint. All of it made possible due to the super profits of Audi...without Audi's stellar performance, VW group would have collapsed in on itself ages ago.

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    Quote Originally Posted by BlackGTP View Post
    I see everyone is jumping on the VW bandwagon because the article says to. The structure does work, to an extent. I suspect it will work fine until another competitor takes a large bite out of VW's market share, then their structure will crumble. VW's structure requires either constant growth or a minimum of flat volume. Any declines in their market share will cause costs to go way up. And if the decline in market share occurs, guess what? They will start to look for effeciencies....
    1) Isn't the point of dominating the market gaining market share? Thereby making you argument a moot point?

    2) COST is the driving factor for market share, and I think that's where VW will learn from GM's mistakes. Of course every company has a break-even point, but as long as VW keeps costs under control, they should be fine with slightly turbulent share gains/loses.

    The thing that destroyed GM was its exorbitant costs... GM was "upside down" even when they still owned over 1/4 of the market. That tells me someone wasn't watching costs too well at some point in the company's history.

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    VW doesn't seem to have an Achille's Heel...O_o

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    Quote Originally Posted by FUTURE_OF_GM View Post
    1) Isn't the point of dominating the market gaining market share? Thereby making you argument a moot point?

    2) COST is the driving factor for market share, and I think that's where VW will learn from GM's mistakes. Of course every company has a break-even point, but as long as VW keeps costs under control, they should be fine with slightly turbulent share gains/loses.

    The thing that destroyed GM was its exorbitant costs... GM was "upside down" even when they still owned over 1/4 of the market. That tells me someone wasn't watching costs too well at some point in the company's history.
    But that is the exact problem of GM's old structure and VW's current. It is extremely easy for costs to run out of control. And in times of downturn when the company needs to act as one to survive, it will again be extremely difficult. Each fiefdom is used to working on it's own, with a big ego at the helm. The big ego will not want to ceed power.

    There is no denying that it is working just fine today. But again, the structure is not flexible to major changes and breeds inefficiencies. If VW gets a weak CEO, etc, things will quickly turn sour.

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    I believe VW does NOT "Protect" one LINE from another IE GOLF is not held back option/powertrain wise to allow room for the A3 VS GM
    that will NOT put the 2.0L in a Cruze as your supposed to buy a Buick Varano for higher dollars as a consumer I find that a turn off as I want a H/B with 200 BHP and GM doesn't offer it and expects me to buy a SEDAN Varano OR Equinox OR a 140 BHP SONIC )-:
    VS VW offers the golf in 4DR H/B Estate / SEDAN (JETTA) and power trains from ECONOMIC up to "hot hatch" GTI

    and the structure in a down turn I assume each MAKE would have to get its "OWN HOUSE" in order and not "LEAN" on another devision (like Opel) and would probable be sold/ restructured if the brand could not make a profit AND prove its worth to VW VS GM that HAS to do all the CLEANING up from the top as I assume brands were allowed to deteriorate to the point that they were not "stand alone" profitable
    Last edited by richmond2000; 12-08-2012 at 08:32 PM.

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    Re: How VW is run like GM used to be, operates like no other carmaker today

    Quote Originally Posted by Stéphane Dumas View Post
    VW doesn't seem to have an Achille's Heel...O_o
    I would argue making cars that fall apart soon after you drive them off the lot counts as an Achille's Heel.

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