Globalizing Volkswagen: Creating

Excellence on all fronts

Presented by: Bakul Sanakal
Fenella Andrade
Sarah Choudhary

Masters in European Studies and Management (MESM)
2010-2012
Manipal Centre for European Studies
Manipal University, Karnataka, India



Automotive Industry Trends in the period of the 90s

Revolutionary changes in manufacturing processes (system based
on a network of suppliers, JIT, lean systems, outsourcing, kanban) - report
from MIT (Massachusetts Institute of Technology)

The change in perception and consumer lifestyle (marked the emergence
of a variety of niche segment)

Environmental issues and fuel efficiency

The rapid development of business support car manufacturing
industry (finance, insurance, credit cards and leasing)

The strategic alliance between the car manufacturer in R & D


Gradual change in perception of the company's line of
products:
Audi having elevated into premium luxurious cars
Volkswagen moved upmarket to fill the void left
by Audi (the fifth-generation Passat launched)
Seat and Skoda now occupying what was once
VW's core market
In 1994, start the development of new bettle
This (VW) move upmarket was continued with the
Mark 4 Golf, introduced at the end of 1997
MANAGING PRODUCTS PORTFOLIO:
..through the heart and soul of the brand
Integrate VW plants within the same region
Similarity of the platform allowed for short set up times in factory,
underutilized plants receive parts from other plants
Flexible production schedule, improve the flexibility and efficiency
of production
Foreign employment level had increased from 41% (1993) to 51%
(2001)
Worker in Wolfsburg had their work time reduced by 20% and
received 16% less salary (in 4-day workweek)
In all modular production facilities, wages are dramatically lower
and unions are much weaker than in traditional auto plants
Global manufacturing system, modular production
and platform strategy
Strategy options
Appropriate strategy:
Use similar parts
Badge manufacturing (same car with diff brands)
Platform sharing (same manufacturing space for many cars)
- Faster development times
- Low development costs
- Easy to achieve Economies of scale
- under utilized plants picked up
Polo vs. Golf


World class manufacturing
Innovative approaches:
Audi engine plant in Hungry
- Became component supplier to VW group
- 1 Million engines, over 50,000 Audi TT
- Biggest exporter of Hungry

Skoda plant in Czech Republic
- Forefront of supplier Integration of Europe
- 6 integrated online suppliers (carpets, seats, exhaust systems, dashboards )
- Most cost-effective in Europe
- Increased Output per employees
- 10.1 (1994)
- 30 (1998)



World class manufacturing
VW plant in Resende, Brazil (1996)
- Most innovative factory in world
-30,000 trucks and buses per year
- Responsible only for final quality control
Modular manufacturing systems (2000)
- 11 modules
-Common for many car models
- Total capacity- 10 million units
Flexible production schedule in Germany, 5000 X 5000 program
- Flexibility of production with Union
-Aligning production and sales
- Less inventory
- Vary working hrs with demand (48 hrs in peak)
- Promise to reduce unemployment by 50%
- Guaranteed fixed salary (depending on employees competency)


World wide sales
North America
- NAFTA countries (US, Canada, Mexico) massive growth
-Increase in US market share from 1% (1993) to 5% (2000)
- Shortage of vehicles imported from Brazil and Europe

Asia and Europe
- Command over 51% of Chinese market share
-Local production sites, suppliers relocation to comply with the local demand
- Highly competitive market European market
- Ford Europe struggling with high production bases
- market share dropped from 13.5 to 10.8
- Lost around $2.7 billion and reduced the production capacity from 2.3 million to
1.6 million in 2001
- Opel (European Division of GM) focus on developing countries
- Failed to achieve cost efficiency
- Market shares dropped down from 12.9% to 10.8% (1994 2000)

Distribution and Financial systems
Physical differentiation of VW and Audi
- Large price range among the products( diff. dealership/independent roof)
- Opportunity to build own delivery centre and theme park in Wolfburg
- Team Autostadt tourist attraction
-2 engine cylinders (Auto towers), storage of ready for delivery cars, can handle
1000 cars daily, display of history of cars and modern production process

Financial Services
Retail customers
Car credits, leasing and insurance services
Fleet customers
Dealer services (working capital loan, investment loan and financing of
inventories)
Volkswagen banks (credit cards, bank a/c mortgages, online and telephone
banking)



Piech said: "You don't win battles by being friendly."
Piech is a car-obsessed engineer and
perfectionist.
Piech has claimed that the three great loves of
his life are: Volkswagen, family, and money.
Breaking the old traditions: arranged new
product portfolio and new manufacturing
strategy
Strict management policy. Many speak that he
uses dictatorial management style.
Piech is known for his determination and
ambition.
His aggressive style moves VW groups into
new market segments (Bugatti, Lambo,
Bentley, etc)
Ferdinand Piech,
the driven man of VW
1993-2002 - PIECH transform VW into big cash machine
Piechs Way
Introduction of 4 day work week
Annual work time reduced by 20% and 16% less salary to
employees
20% reduction in Board members salary
Reduced number of Board members from 9 to 5
Believed in open competition between the brands
Different brands were free to make their decisions as long as
they produced good results
Technology sharing between the brands


VOLKSWAGEN FUTURE
CHALLENGE

Keep the competitive advantage
sustainable.

Maintaining economies of scale
from global manufacturing and
sales worldwide

Environmental issues:
Aware of the role of new
technologies (efficient Diesel
engine, flexible-fuel vehicles)
Question 1

CHALLENGES and PROBLEMS that arose
Changing consumer needs
Weak model line-ups (VW Car prices are considered not
reasonable by the consumer)
Over staffing
Inefficiency (the other car manufacturers are able to produce with
more efficient)
High cost base (cost of plant operations is too high)
Less market share in US and to some extent Europe due to the
dominance of Ford and Opel
Lack of integration between the brands managed resulting in
unnecessary duplication of costs

AUDI A8 4.2 VW PHAETON
Modular
manufacturing
system
PLATFORM D

(wiring-
steering-
braking
diagrams)

Question 5

Open communication among the Board members
(Information sharing all can present their ideas)
Organic structure (can express their views freely as long
as each brand contributes equally)
Decentralize at brands level
Work time and salary is reduced


THANK YOU
Submitted By :
Ashwath P
Bakul Sanakal
Fenella Andrade
Sarah