Volkswagen in reboot mode after diesel scandal

For a company that was virtually down and out last year, Volkswagen (VW) seems to have bounced back rather quickly. Sure, there are huge payouts still to be made in connection with the diesel scam but if the sales numbers in 2016 are any indication thus far, its customers across the world are clearly in a forgiving mood.

At a recent roundtable with a team of Indian journalists at the Paris Motor Show, Jurgen Stackmann, Member of the Board of Management, Volkswagen Passenger Cars, said sales were stable, albeit with some regional variations. China continues to be a strong market for VW and is still expanding to double digit growth this year. Europe is “completely stable” while the outlook for the US is optimistic. “It is the fastest recovering image market which is important. Mexico is strong and Canada is stable,” he said.

The area of concern is South America thanks to “high instability in politics and economics”. What is especially welcome is that sales patterns for the VW brand are “completely stable” with the outlook for 2017 being optimistic too. “We are making very good progress dealing with the diesel issue in the US both from the legal and technical perspective,” said Stackmann. A final closure is expected this year. In Europe, likewise, there 5.6 million cars involved in the clean up exercise and the work involved has been intense since there will be no changes in mileage, performance and noise after the fix.

If there has been one benefit arising out of the diesel scandal, it is the change in attitudes within VW. “The way we work together at VW has changed dramatically,” said Stackmann. This is especially evident for the new initiative in electric cars where there is more agility and greater teamwork. “You need to think differently and look at joint solutions to get the target. It will be a race against time, knowhow, prudent decision making in investments and taking the right steps,” he added.

Today, there are a whole lot of cross-functional teams at headquarters in Wolfsburg which is otherwise unusual in the VW world where people traditionally work in silos. Stackmann’s own team is moving to Berlin to work on synergies with start-up businesses and scour for partners in the digital work of the future. “The character of the company has changed dramatically beyond electric cars alone,” he said.

According to Stackmann, the real challenge for VW is to open itself to direct customer contact, which has never happened before since this function was delegated to its dealers for decades. “We have to prove everyday our added value to customers in the ecosystem. This means changing company attitudes from a more inward technology carmaker to one that is in the customer’s face,” he said.

Going forward, VW will create a 13th brand which is about mobility. It will be a big investment plan which requires good execution and planning with a lot of management competencies thrown in. By the first quarter of 2017, the company plans to have the “most American VW ever created” to take on rivals like the Ford Explorer.

Though its market share in the US is barely two per cent, the objective is to grow this in a big way in the years to come. “We are optimistic about this aggressive plan and we can use this just-gained brand awareness to turn it into something good,” said Stackmann.

For the rest of the world, the focus is on SUVs and crossovers. The last of the launches will be “an interesting part for India” where some news is expected on a small car or SUV entering the market either in 2017 or 18. As Stackmann reiterated, this will be a newly developed platform with two dimensions: one for markets like Europe and then the global market which could then become relevant for India.

Conceding that India was the “toughest market on earth”, he said the need of the hour was to look at technology for the future as it is a critical region for VW. “We have to stretch ourselves to create a presence in emerging markets with Indiabeing the reference point and benchmark,” added Stackmann.

It is here that the right costing structure becomes imperative in order to succeed and this is where VW’s Strategy 2025 becomes a key part of the plans ahead. The company is only too aware that it needs to offer region-specific solutions that, in turn, will depend on disposable incomes.

As he put it, India has a rapidly growing population and represents a cluster of markets like Russia and South America which are similar. “We need a strong engineering presence in India and this should be built up. The key is to find solutions for a low cost market like India which cannot be done in Wolfsburg with the greatest people at the table,” said Stackmann.

The finer details of Strategy 2025 will be known in November when issues on cluster plans for low cost countries will be discussed along with potential solutions. With varying standards of affluence across the world, providing “one global quality standard is not the solution”.

It is here that regional clusters will help in better decision making. “The idea is to get closer to customers with regional product programmes and execute them,” said Stackmann.

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