| Volkswagen North America is projecting tripling its | | | | - Poor Quality Reputation |
| sales in the United States (U.S.) market over the next | | | | - Lack of Brand Loyalty |
| five to eight years. This ambitious plan is the brainchild | | | | - Exchange Rate effects profits significantly |
| of the newly installed CEO Stefan Jacoby, who | | | | Opportunities |
| already made major waves by deciding to move | | | | - Connecting to consumers |
| Volkswagen North American headquarters away | | | | - Better Employee Pool |
| from the “Motor City” in state of Michigan to the | | | | - Development of U.S. Products |
| more business friendly state of Virginia. With sales | | | | Threats |
| numbers already off pace for previous years is | | | | - Economic Downturn |
| Volkswagens (VW) projected growth feasible, and if | | | | - Continued Quality Issue |
| so what can VW do to reach this goal (Robinson, | | | | - New Competition in the U.S. Market |
| 2009, pp. 11-1) | | | | While VW North America has a number of strengths |
| Moving the company is a smart business move, many | | | | within its restructuring plan including the financial |
| automotive and other businesses have had to leave | | | | incentives of moving its headquarters to Virginia, and |
| Michigan for a number of reasons. Michigan’s poor | | | | taking more control over its U.S. product design and |
| economy is a major one; but attracting educated and | | | | marketing. There are several other advantages to |
| skilled staff is another. Michigan’s poor economy | | | | centralizing control in the U.S. instead of having to rely |
| and quality of life has been the main factor in causing | | | | on governance from from Germany. Creating a more |
| over fifty percent of University of Michigan graduates | | | | nimble organization that is better able to respond to the |
| seek opportunities elsewhere. They head for urban | | | | needs of the unique U.S. market. |
| centers such as Chicago, New York, Washington D.C., | | | | This plan also shifts the overall organizational structure |
| and Seattle. Currently there are three times more | | | | and creates a new chain of command that is more |
| Michigan State graduates living in Chicago, than in | | | | autonomous than the previous structure. The company |
| Detroit, many graduates citing quality of life as a major | | | | has moved from being a multinational structure to a |
| factor in leaving the Detroit metro area (French, 2009). | | | | multidomestic structure. In place of management |
| However, for VW there is another major reason for | | | | decisions coming from Germany, they are directed |
| the move, Virginia is offering VW six million dollars in | | | | from the U.S. management team that reports to the |
| economic incentives, a number that Michigan cannot | | | | parent company. VW was still attempting to push its |
| match. As well as positioning the company in one of its | | | | original business model “of one car for all |
| historically strong markets along the east coast. | | | | markets” that had been successful in the 1960s, but |
| Indicating that attracting qualified staff was another | | | | by the 1980s VW was in major trouble in the U.S. |
| reason for the move, Jacoby said “he did not think | | | | market. VW stumbled badly in the 1970s and '80s with |
| it would be difficult to find qualified auto executives and | | | | products buyers could not relate to after decades of |
| senior staff in the Washington area, given the | | | | mechanically simple and durable rear-drive Beetles and |
| educational levels in the region” (Press, 2007). I | | | | Microbuses (Kiley, 2004). In 1987 VW was forced to |
| know that when I was considering working for a major | | | | shut down it’s only U.S. manufacturing facility in |
| automaker, I did not consider any with offices in | | | | Pennsylvania, and moved all production back to |
| Dearborn, Detroit, or other parts of Michigan, as having | | | | Germany (Buchholz, 2009). Creating vehicles that |
| lived in Michigan for a short time, and visited a number | | | | were specifically tailored to the U.S. market such as |
| of times for business, that it is not a place I would | | | | the Tiguan crossover SUV, is a major step towards |
| consider moving to. I instead worked with companies | | | | becoming competitive in the largest car market in the |
| with design centers in California, and even applied to | | | | world; the 1980’s and 1990’s saw the departure |
| the Audi division in Virginia before deciding to stay in | | | | a of a number of European automotive brands |
| California for a few more years. | | | | attempting to survive in the U.S. market. Companies like |
| Moving the company will result in the loss of about 400 | | | | Peugeot, Alfa Romeo, Fiat, MG, Triumph, Renault, and |
| jobs, and has been met with sharp criticism by the | | | | several others pulled out of the U.S. market. VW builds |
| employees who feel that the German company has | | | | cars that compete with those brands in Europe, South |
| failed them by not offering products tailored to the | | | | America, and Asia, and for many years, they have |
| American Market. Jacoby accepted this failure on the | | | | been attempting to complete again U.S. and Asian |
| part of the company, and VW seems to have taken it | | | | carmakers with the same product. VW has shifted to |
| to heart designing vehicles specifically for the U.S. | | | | accept that the competition in each market is vastly |
| market. Joe Ivers, of JD Power and Associates says | | | | different; other carmakers have realized this fact a |
| VW suffers from a cultural divide between Germany | | | | number of years ago, such as Ford Motor Company |
| and the USA. "VW is more apt to design a feature like | | | | that employed a multidomestic structure since the |
| a radio or a dashboard with cost and their own sense | | | | 1960’s. Ford created four regional companies, Ford |
| of taste in mind instead of what the consumer actually | | | | North America, Ford South America, Ford Europe, and |
| wants” (Kiley, 2004). | | | | Ford Asia, each with its own leadership, vision, and |
| VW’s is also plagued with a reputation of poor | | | | vehicle line directed to their markets (Briscoe, 2004). |
| quality that is emphasized when compared to Asian | | | | This is likely to change in the future as the world |
| imports such as the automotive powerhouse Toyota | | | | continues to shrink and markets begin to converge, |
| (Robinson, 2009, pp. 11-2). In order to reach the lofty | | | | BMW has shown us that they build a product that is |
| goal of 700,000 units a year VW overcome its | | | | globally recognized be it the new MINI or a M3. There |
| reputation of poor quality that it has rightfully earned. | | | | has even been talk at companies like Ford, Fiat, and |
| As someone that has worked in the automotive | | | | others to combine global vehicle production on |
| industry, I have seen VW’s decline in quality over | | | | universal platforms that can be tailored to each |
| the years. VW in the 1990s was known for producing | | | | companies exterior styling, while remaining mechanically |
| vehicle that suffered from a number of minor | | | | identical, such as the new Ford KA, Mazda 1, and Fiat |
| problems, from faulty wiring to interior panels detaching | | | | 500 sharing the majority of their parts creating |
| while driving. This is not just my opinion it is backed up | | | | collaborations that have never been done before. |
| by the automotive research firm J.D. Power and | | | | Quality management is another vital determiner of |
| Associates. In the J.D. Power Initial Quality Study, | | | | VW’s short and long-term success in the U.S. |
| based on complaints in the first three months of | | | | market. VW has a program that they themselves |
| ownership, VW sank 15% to next-to-last among all | | | | describe as a quality management system known as |
| brands, while the industry as a whole improved 11%. | | | | “Volkswagen Excellence” that has lead to lower |
| Over three years of ownership, in the survey by J.D. | | | | frequency of defects in their products. VW takes a |
| Power used to gauge reliability, VW ranked 33rd out | | | | holistic approach to quality management. Not only are |
| of 37 brands and was still dropping. This is costing VW | | | | the physical products a target of quality management, |
| one of the automotive industries most prized | | | | but also the consumer’s interaction with the |
| consumers, repeat customers. One buyer who does | | | | company as a part of the quality management |
| not plan to re-up with VW is Sandy Goroff, a Boston | | | | process. From creating supplier conventions to |
| book publicist and disgruntled owner of a 2004 Passat | | | | reinforce cooperation in development and supply chain; |
| wagon. Her car often lurches as if it has been hit from | | | | to launching, a quality assurance organization within to |
| behind after she exits a highway and drives slower on | | | | react faster to consumer concerns VW is focused on |
| suburban streets. VW officials do not deny the issue | | | | the consumer (Volkswagen AutoGroup, 2006). |
| exists but have not been able to fix it and at one point | | | | Volkswagen will need to implement this plan and stick |
| suggested, she was driving the car too conservatively. | | | | to it, the one major factor that is out of their control is |
| A former Audi owner, she has been negotiating for a | | | | the economy. At the time of this writing U.S. car sales |
| replacement. "They've done about everything they can | | | | are at their weakest in decades. This plan was put into |
| to negate my brand loyalty," Goroff says. Owners of | | | | place in 2007, and the move was made in April 2008. |
| more finicky front-drive Rabbits and Quantums | | | | Jacoby upped the figure in an interview given at the |
| reported electrical problems, blown engines and fragile | | | | 2008 North American Auto show in Detroit, by |
| window regulators and windshield wipers. That, | | | | projecting that VW would sell 800,000 cars annually in |
| combined with rising prices, almost forced VW to | | | | the U.S. by 2018. When pressed on how the company |
| leave the U.S. market (Kiley, 2004). | | | | would reach a goal such as this in such a short time, |
| Another criticism that VW North America has faced is | | | | considering that in 2007 VW sold 230,000 vehicles |
| that its advertising has been confusing and misdirected | | | | Jacoby said, that they were setting up the target so |
| in the 2000s. Even with legendary advertising firm | | | | that the whole organization knows what the mission is. |
| Crispin, Porter & Bogusky at the helm, the | | | | It is also to drive the product planning, design and |
| message as seemed unfocused. This did not escape | | | | supplier constituencies. They want to pressure the |
| the automotive press one writer said of VW “Sign | | | | whole system (Kiley D. , 2008). Now just |
| THEN Drive” campaign that; “Neither of these | | | | over a year later the overall sales for VW North |
| commercials tells me anything about VW cars or why | | | | America decreased 3.2 percent a company spokes |
| I would want one. The humor is crass, insulting, and | | | | person said “Despite these economic conditions, |
| juvenile. Along with VW’s recent spate of | | | | 2008 was still a good year for Volkswagen. We |
| commercials that show VW drivers constantly getting | | | | relocated our North American headquarters to |
| into accidents, VW seems to have an extremely low | | | | Herndon, Virginia bringing us closer to our customers, |
| opinion of its buyers. Then again, given VW’s poor | | | | we announced an all-new North American production |
| reliability, high cost of maintenance and repair, and high | | | | facility will be built in Chattanooga, TN vehicle that |
| price points, maybe VW knows exactly what it's | | | | allowed Volkswagen to buck the economic downturn |
| doing” (Ferng, 2008). Jacoby admits that the ad | | | | as our sales remained close to our 2007 |
| agency should not have been tasked with creating the | | | | totals. Volkswagen of America has a plan in place for |
| overall message for the company. “One thing I | | | | a successful future here in the U.S.” (Volkswagen |
| know is that the ad agency can’t be expected to | | | | North America, 2009). It’s seems that VW has |
| guide the brand if we don’t know where we are | | | | been implementing its plan without adjusting for the |
| going” (Robinson, 2009, pp. 11-3). | | | | current economy, it will be interesting to see how it |
| In review, newly appointed VW CEO Stefan Jacoby | | | | plays out over the next several years of the plan. With |
| plans to move the company to a new state in hopes | | | | the current economic condition, federal regulations for |
| to gain a more competitive advantage in executive | | | | gas mileage and green house gasses, and a globalizing |
| labor force, retool the U.S. vehicle lineup, focus on a | | | | of platforms, VW may find itself rethinking its plan |
| new corporate message of VW, all with the hope of | | | | sooner than expected. |
| selling 700,000 vehicles in the USA annually in less than | | | | Works Cited |
| eight years. Implementation of this plan is going to be a | | | | Briscoe, D. &. (2004). International Human Resouce |
| monumental task, and the projection of tripling sales is | | | | Management. New York: Routledge. |
| a major commitment. VW may be able to achieve this | | | | Buchholz, D. P. (2009). Case Study: Volkswagen: Pining |
| if the plan of growth by following a strict yet flexible | | | | For The Gentleman Caller. CFED . |
| plan. Strict in the since that its goals are unchanging, | | | | Ferng, J. (2008, March 28). VW AD Campaign is a |
| flexible in that over time the product, processes, and | | | | No-Brainer. Literally. The Truth About Cars . |
| message may be altered to fit the current market | | | | French, R. (2009, April 3). Half of university grads flee |
| conditions. | | | | Michigan. The Detroit News . |
| Strengthens, Weaknesses, Opportunities, and Threats | | | | Kiley, D. (2004, May 11). Quality-control guru tackles |
| (S.W.O.T.) analysis is a common way to capture a | | | | VW problems. USA Today . |
| snap shot of a proposed plan. I have applied this | | | | Kiley, D. (2008, January 17). VW's Sales Target: Bold or |
| process to the VW plan for U.S. below: | | | | Bull? Business Week . |
| Strengthens | | | | Press, A. (2007, September 6). Virginia, VW moving |
| - 6 Million Dollars in incentives | | | | from Michigan to. Retrieved April 24, 2009, from |
| - Cost Savings in staffing cut | | | | MSNBC.Com: |
| - U.S. control over U.S. Products | | | | Robinson, P. &. (2009). Strategic Management. |
| Weaknesses | | | | New York: McGraw-Hill. |