Autobahn: what would I do if I was Volkswagen Group’s boss

I follow car journal websites every day. Not because just to see car reviews and read some bribed car magazine “unbiased” opinions on some brands’ futures, but also because they give me some inspiration and idea on what to write about on my blog next. This time it is about two articles I found on Volkswagen group brands (Škoda and Seat) because they made me think and to come up with some radical, cost saving moves for the brand. The article about Seat said that they have been struggling to find their place in the market and they hope that their latest models which look very pretty will gain some attention. The other one was Škoda stating that their top priority for brand’s development is….design. Sounds barely like strong plans of a large automotive corporation, doesn’t it?

Just a little background info. Volkswagen Group consists not just of Volkswagen, but of Audi, Seat, Škoda, Lamborghini, Porsche, Bentley and even that God damned Bugatti. And many of you don’t know that VW group have a target set for 2015 which states that the group will be THE BIGGEST CAR MAKER IN THE WORLD. Not just in global market share (where it now is about 1% shy from GM), but also revenue, profits, customer satisfaction and so on. Typical German target. However, what is not typical just recently is VW gradually makes the bad signs of being a large car company apparent even to those who are not car enthusiasts. These signs are very typical for GM, which is a bit of an insult for this great group. The thing I am talking about is “heavy badge engineering”.

 

To those who don’t know what “badge engineering” means, let me draw your attention to the picture below:

What VW group says about these cars is this: these are two different models. However, to me and you it is clearly obvious that this is not the case. Clearly they look exactly the same. The reason for that is to save costs and to gain massive advances in increasing market share all over the world large car companies tend to not do much to the car apart from changing the badge, alter the design only slightly and changing the design of the interior, including “distinctive features that characterize the brand” (the kind of thing SAAB got obsessed with in their final years and something that scared potential customers away, as they were nothing more but rebadged Vauxhall/Opel Vectras (or Saturn Auras, if you’re from America) with some odd designs and ridiculous sticker prices). Everything else in the car (engines, drivetrain, chassis, electronics, software etc) is exactly the same. Then they price them differently which is when it gets weird.

Why does VW make two cars that are essentially the same when only Audi A4 (one on the left) is the one that sells more  and makes money for the VW group. Seat Exeo is just there with tiny production numbers and no reason to explain why it was created at all.

Why doesn’t VW do something Chrysler did recently – set out main purposes of brands – what are they going to do, who they are for and what will be their strength – for example they stated loud and clear that Dodge from now on will be the performance brand of the Chrysler Corporation. But for VW like for GM there are way too many badge-engineered cars that don’t sell as well as their originals, wasting money and resources for the group. To understand what I’m talking about, let us look at VW group’s consumer brands – Audi, VW, Seat and Škoda.

 

ŠKODA

 In my view the biggest victim to Volkswagen empire’s sinister badge engineering are Czech car makers Škoda. For those who don’t know them, Škoda are a Czech car company that until 90s were an independent manufacturer, but because of the “successful” Communist experiment in Eastern Europe, because when the Eastern Bloc broke free from Communism and the #1 Capitalist business idea for Eastern bloc in the 90s was selling off everything they could get a hand on (including manufacturing equipment) and because all Communists cared about was having everyone employed (even those who have no idea how to build a car whatsoever) the quality of Škodas in those days wasn’t good. So when Capitalism came into Czech Republic in 1990s suddenly an ordinary Czech citizen could buy a more reliable car. Luckily for them in 1994 Volkswagen saw an opportunity and decided to try their luck by developing a car together with them. Their first car was a Škoda Felicia. Instantly it was a big surprise in the west, because in 1998 Škoda in Britain became the best manufacturer. Quite a change for a car company from an ex-Communist bloc country.

Seemed like a good start for the brand that got its rebirth under German control. But as soon as old Škoda platforms were replaced by VW ones. The design and parts became even more and more Volkswagenish. No issues with that but why would they waste money on creating cars that look, drive and sound the same?

SEAT

Seat is the second biggest victim to Volkswagen’s badge engineering malarkey. Unlike Škoda, Seat was not doomed because of changing political winds. After long disputes with Fiat which deteriorated their quality Seat went into talks with Toyota, Nissan and Mitsubishi (who in 80s seemed to collaborate with every single manufacturer in the world, especially Chrysler Corporation). During these talks Volkswagen came to Seat and asked: “would you be very kind and build our Passat and Polo?” By September 30th of 1982 Volkswagen were in and Seat started assembling their cars.

The only time Seat tried to do something different and not obey Volkswagen’s design language was in mid-2000s when they started designing fishbowl-shaped cars like the Leon (above). But soon after they went back to designing cars that resemble Golfs and Passats. They even had a car called Seat Exeo which looked EXACTLY like an Audi A4. Inside and out. I once took a cab ride in one and I was surprised on how precisely Seat have copied the Audi. In 4 years of its production Seat produced just over 75 000 Exeos. It is weird that actually so few people bought it because it essentially was a discounted Audi A4. In all fairness I am surprised it was made at all because of it being a perfect copy of another, more successful car.

BENTLEY

Oh, are you surprised? Well you should be. Because Bentley is yet another victim of Volkswagen’s badge engineering. Example – Volkswagen Phaeton which had its VW badges removed, some interior pieces changed and rebranded as Bentley Continental Flying Spur. Yes, a Bentley that has underpinnings of a Volkswagen. Even BMW don’t do that with Rolls-Royce don’t do that.

Whenever I see one Bentley parked just outside our University’s international school I think “the owner is such a moron.” He is, because he’s spent tens of thousands more for exactly the same car just because it has a fancier badge on the nose. Besides he could’ve saved even more if he bought one second-hand. Seriously, VW Phaetons are laughably cheap. You can pick up a good one with a 5 litre diesel engine for just about €7000!!!! Not kidding. There’s one being advertised on Latvia’s top car advertising pages:

Don’t get me wrong. VW Phaeton is a fantastic automobile. In fact this is the best bargain you can possibly get because a) it’s made by Volkswagen which means it is reliable; b) Ferdinand Piech, then chairman of VW, set out targets for the Phaeton that many engineers thought were impossible to meet, yet they were met, which means this car is massively over-engineered; c) it is super comfortable for everyone. But when a car that wears exactly the same badge that the Beetle wore in 1940s, this questions why would the maker of “People’s cars” (translating from German, volk – “the nation”, “people” and wagen – “car”, “carriage”) would introduce their production methods and the car to an old, rich-herritage British automaker? When even engines have been “masked” to fool these crazy buyers? Clearly they are THE SAME ENGINE. A VW W12 engine!!

They might have done something what one owner of a Phaeton did and nobody would notice – put some Bentley ornaments on it and disguise it as a Flying Spur. Trust me, these rich buyers would not notice that they are wasting thousands on a Volkswagen.

WHAT WOULD I DO?

Now at last, after I’ve got everything off my chest I can finally let you know what I would do if I would lead this big empire.

1) GET BENTLEY TO MAKE INDEPENDENTLY ENGINEERED CARS: no more Volkswagen nonsense, no more badge swapping. It’s not like Volkswagen group can’t afford to design a whole new car. If they could afford to waste millions on every Bugatti they made they can afford to engineer brand new platforms for new Bentleys.

2) VOLKSWAGEN IS A PEOPLE’S CAR AND IT SHOULD STAY THAT WAY: let them keep the Polo and let them keep the Golf hatch. Those should be biggest cars they should be making to live up to their name. Make the UP!, make anything you can, but quit making the Phaeton, stop selling Passat (nobody would care, it is boring enough to leave the scene unnoticed) and invest in smaller cars. Because of such quick depreciations such big cars should be made by other brands because depreciation for an average customer matters.

3) ŠKODA – MAKER OF YOUR AVERAGE JOE’S GETABOUTS: now Škoda does a fantastic job with the Superb and Octavia (which are badge engineered VW Passat and VW Golf saloon/estate) that they are more reliable than their VW and Audi counterparts. Also Škoda’s “worker’s cars” such as Roomster and Yeti (which Jeremy Clarkson loved a lot) must stay, which means VW could stop making the more expensive Caddie, saving even more money and increasing more revenue when those indecisive buyers who couldn’t decide between Caddie and Roomster would start buying Roomsters which could use the money surplus from unproduced Caddies to improve it.

4) SEAT – THE HOT BRAND: I love the principle that Fiat Chrysler realized when they announced their “Five Year Plan”. One of them was to make Dodge to be strictly a performance brand. VW should do the same with Seat. They have already left their mark in motorsport and their recent designs are very sharp and sporty. Why not? VW could keep the Golf GTI, but all other performance versions of other VW lineup cars could be made in Spain. Why not? Maybe even develop new performance cars for middle classes? A rival to a Mazda MX-5 perhaps? The closest offering from VW group is a Porsche Boxster but that’s a luxury brand.

This might be just a small step for a larger reorganization, but I believe that these four steps could give a big kick that VW needs to become the biggest car group in the world. I understand that you use badge-engineering to save time and costs on developing new models, but what’s the point of creating 5 cars under different brands that are in many ways exactly the same.

There’s not much time left until the end of 2015, so if anyone from VW sees this, discuss this in your boardroom meetings. It can work out well!

My automotive heroes: Lee Iacocca

Once in a while I will talk about some of my automotive heroes. Guys who had a huge passion for what they did and those who I highly admire. A couple of weeks ago I talked about Colin Chapman. This week I will talk about the guy who’s straight talk and risk paid off when he took up one of most difficult jobs that any automotive entrepreneur could take. No, I am not for once talking about John DeLorean. I am talking about Lee Iacocca.

Lido Anthony Iacocca, an American patriot with Italian passion.

Some of my closest friends already know that on my phone and my laptop I have a picture folder entitled “Car Guys”. Call me nuts, but in this folder I have pictures of most recognizable and talented executives in automotive world. I flick through them once in a while to gain confidence and to regain the boost for my inspiration: work in a car company. Until recently the dominant person in there was John DeLorean. But recently I read Bob Lutz’s “Icons and Idiots” where he talked about the executives he worked with during his life. The biggest chapter in the book was titled “The name is an acronym for “I Am Chairman Of Chrysler Corporation Always” which was about Bob’s work under Iacocca’s leadership. Though in some areas of this chapter Lutz painted the picture of Iacocca in dark colors the overall vision of him was truly remarkable. So remarkable that I decided to look into what has this man done…and I almost fell of my chair from amazement from the achievement this man has made. So here are some big achievements this man has made that has changed the automotive world forever:

1) HE IS THE FATHER OF MUSTANG

Lee Iacocca studied industrial engineering and began his career at Ford Motor Company as an engineer. But, after a couple of months he understand that this job is not for him, he asked if he could be moved to marketing and sales. So they did…and that is where the true genius of this man started to show. His selling genius was recognized nationwide while working in Philadelphia as assistant sales manager with his “56 for 56” campaign, i.e. all 1956 Ford model range cars with $56 monthly payments for three years (about £285 in today’s money). Because of this he was transferred to Ford’s Headquarters where in 1960 he became the Vice-President. Then in 1964 he introduced a car that changed the automotive industry forever and changed the idea of “American automobile” – Ford Mustang.

The Mustang almost didn’t happen, because of Ford’s then recent fiasco that became a household name for “disaster”: Ford Edsel (the car who’s grill resembles the one on Bugatti Veyron). It was thanks to Lee Iacocca’s straight talk and determination that they got green light for the car. And it sold…in less than 2 years they sold over 1 million Mustangs and, as many car historians have said, Mustang “put America on wheels” as it was very good value for money.

For Mustang’s 45th anniversary (this year Mustang celebrates 50 years, by the way) Ford produced a special “Lee Iacocca” Mustang to immortalize the name and the legacy that this great man created (the car you see below).

2) HE GOT FIRED FROM ONE “BIG 3” COMPANY ONLY TO LAND HIMSELF INTO ANOTHER ONE

By 1970 Lee Iacocca was made the president of Ford Motor Company. He did make one terrible mistake with the Ford Pinto (look at “Episode 3” of my YouTube blog https://www.youtube.com/watch?v=9D16-y-B0lY) and was known for saying “Safety doesn’t sell”, but under his watch Ford Motor Company flourished. Then suddenly, in 1978, when the company he managed was making healthy $2 billion, he was fired for clashing too much with ideas made by another board member, Henry Ford II. This came at the right time, because straight after he was made chairman of another American giant, Chrysler Corporation, where his actions became legendary.

3) IF NOT FOR HIM, CHRYSLER WOULD’VE COLLAPSED

The Chrysler Corporation in everyone’s eyes were dead in 1978. The company was making losses so big, workers were praying God that the collapse won’t hurt them too much. Iacocca, being an extremely tough guy, saw a huge potential in the company and went to the U.S. congress, asking for a loan of $750 million to save Chrysler. Some of congressmen went crazy, saying that this investment would ruin American economy and it would be wasted. On the other hand, Lee came back, arguing that if they do let Chrysler fail, the damage to the Economy would’ve been far more disastrous than the loan itself (approximately $10 billion a year).

In the end the government trusted Iacocca, giving him $1.5 billion to invest into Chrysler corporation and asked to repay this loan by the end of 1990. Lee kept his promise and turned the company and repaid the loan already in mid 1983 (below: him celebrating the loan repayment)

The introduction of the K-car (i.e. K-platform car that had front-wheel drive and economy engines) brought tons of money into the company despite the economic decline at the time and made Lee Iacocca a household name. Lee also made sure that Chrysler was synonymous with “quality” and “reliability”.

4) HE INTRODUCED THE MINIVAN WE ALL KNOW

GM and Ford already were under way with introducing a minivan, but Iacocca got the formula right – a spacious, front-wheel-drive getabout for those new families, groups of friends and wannabe rockstars. By this time Lee was so sure of himself that he started appearing regularly in car commercials. He has been famous for saying “If you can find a better car, buy it.” And they didn’t, as Chrysler was the best at the time in the States.

5) HE SAVED LAMBORGHINI

There was another company with one foot in the grave at the time – Automobili Lamborghini. Because of Iacocca’s Italian parents and his love for the country (he had a property there) he decided to make a gamble for it and it paid off. Diablo instantly became Lamborghini’s best selling car and saved the dying Italian company. Also, with help from Lambo people, Chrysler developed a V10 engine that they put into their Viper, another legendary car that was born during Iacocca’s time at the helm.

 

So there you have it. This guy, though having some lows, in the car world he’s going to be remembered as a legend that changed the face of automotive industry forever. A living legend. I wish him good health and still long enough time on this Earth to have a chance to do plenty of charity work what he has been doing for most of his retirement.