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It wasn’t supposed to be like this. Volkswagen set its sights on world domination back in 2009: it was to make orderly progress through expansion, increasing sales with new marques, a wider product range, and ventures into new markets. By 2018 it would be the global number one in terms of sales volume, profitability, employee motivation and customer satisfaction.
Well, the Volkswagen Group reached the top spot in 2016 with 10.3 million sales, 135,000 ahead of Toyota. But it did so with reduced profits, a cull of senior executives, and a string of lawsuits across the world indicating the dissatisfaction of governments, trade organisations and customers.
The cause of this change of fortunes was, of course, dieselgate. A year ago at its annual media and investor conference, Frank Witter, the group’s finance chief, explained that some 15bn had been put aside to deal with the fall-out of the diesel scandal, which involved 11 million cars fitted with defeat devices to circumvent emissions tests. The hope was that the matter could be included in the 2015 accounts and cleared up before the end of 2016. It couldn’t and wasn’t.
Volkswagen still faces class-action suits in various countries, including the UK, where customers are claiming compensation as delivered in the US. Paul Willis, head of the Volkswagen Group in the UK, has been having a hard time with the Parliamentary Transport Select Committee on the same issue.
The strange thing is that Volkswagen dealers in the UK report very little reaction to dieselgate from customers. They have been getting on with the rectification of affected models, mostly a software update but with the addition of a flow transformer to the inlet manifold for the 1.6 litre diesel. Volkswagen now expects that programme to be completed by the autumn. A recent slight shift away from diesel towards petrol is thought to be more to do with the demonisation of diesel in the latest drive for air quality improvement in cities – and the longer term effects that may have on diesel residual values.
So although it hasn’t gone away, the diesel scandal did not dominate this year’s Volkswagen Group investor conference. Chief executive Matthias Müller said that the group now has a twin-track agenda: to keep its operations on course, and to implement a five-point programme for the future. The first item of this Together Strategy 2025 is finally to clear up the diesel crisis.
Müller acknowledged that selling 10.3 million vehicles was “a vote of confidence from customers all over the world”, he emphasised that “size is not an end in itself. Chasing records is not what drives us.”
It is fair to say that the change of top management has brought a new and more humble approach. Last year, Müller announced a re-structuring of the group to make the business more agile, decentralised and entrepreneurial.
This means empowering individual brands, where previously all major decisions were made at Volkswagen headquarters in Wolfsburg. But at the same time the strategy calls for a greater synergy between member companies. Apart from making the best use of each company’s expertise, this is also intended to save money by improving the efficiency of its research and development activities.
Audi and Porsche have initiated a joint development programme for some future models. Bentley will base the new Continental on the MSB toolkit platform used for the latest Panamera. Audi is in charge of the group’s larger SUVs and crossovers and has already announced that it will introduce additional models, the Q8 and Q4, starting next year.
Then, of course, there is what Volkswagen calls e-mobility. It will have more electric cars 10 to be launched by 2018 and further BEVs (battery electric vehicles) by 2025, by which time it also plans to be the leader in battery technology. The VW brand heads the EV programme with a new MEB toolkit (used for the ID concept which is expected to go into production in 2020) but Audi and Porsche both have projects for larger electric cars. Audi takes responsibility for autonomous driving and expects to have a self-driving vehicle ready for production in 2021.
Volkswagen achieved its ambition to become the world’s number one car company in 2016 despite itself. Dieselgate rocked it to the core and caused a re-think for the whole business. Müller summed it up: “We have started the biggest transformation in the history of Volkswagen.”