Caso Vw

IMD141
(GM 912)
INTERNATIONAL

v. 25.11.2004

GLOBALIZING VOLKSWAGEN: CREATING EXCELLENCE
ON ALL FRONTS
Research Associate George
Rädler prepared this case
under the supervision of
Professor Z. Jan Kubes as a
basis for class discussion
rather than to illustrate either
effective or ineffective handling
of a business situation.

Is there room for Volkswagen? As its market shrinks,Europe seems to
have one carmaker too many. Could it be troubled Volkswagen? (…)
The biggest danger is that with its problems at home and abroad, VW
will have to abandon any notion of becoming a global car maker.
The Economist, August 28, 1993: 59
No doubt about it: Volkswagen CEO Ferdinand Piëch engineered one
of Europe’s greatest turnarounds ever. The grandson of auto pioneer
FerdinandPorsche inherited a loss of more than $1 billion and
declining market share in 1993. With a battery of new models, Piëch
seized European market share from Ford Motor Company and General
Motors Corp. Including its Audi, Skoda and Seat brands, VW now has
almost 19% of Western European car sales, up from a low of 15% in
1994. Profits last year topped $1.2 billion on sales of $71.4 billion.Business Week, November 22, 1999: 20

When Dr Ferdinand Piëch took over as CEO of the Volkswagen
Group (VW) in early 1993, things did not look good: Customers
complained about high prices, the main factory in Wolfsburg,
Germany was only breaking even at utilization rates above 100%
and Japanese competitors enjoyed a cost advantage of up to
€2,500 per car in their newly built plants in the UK.1992 ended
with profits down 85%.
By 2001 the situation looked totally different. VW was
marketleader in Europe, China and South America (refer to
Exhibit 1 for market data); sales of the VW brand in the US had
increased sevenfold between 1993 and 2001. Overall, VW was
the world’s fourth-largest car company offering 65 models (up
from 30), reported record profits, and newly acquired luxurybrands created growth potential. At home, VW engaged in
unusual ventures: “Autostadt,” a €420 million auto theme park,
followed by a revolutionary €180 million car plant and event
center in the heart of Dresden.
With Piëch stepping down in April 2002, how could VW maintain
spectacular results, clearly outperforming the competition?
Copyright © 2002 by IMD - International Institute forManagement
Development, Lausanne, Switzerland. Not to be used or reproduced without
written permission directly from IMD.

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IMD-3-0912

INTERNATIONAL

Background: The 1990s and Beyond in the Car Industry1
In 1990 the Massachusetts Institute of Technology (MIT) published a report on
car manufacturing. The report (“The Machine that Changed the World”) presented
the findings of a five-yearstudy on efficient car manufacturing around the globe.
The findings were revolutionary. Due to lean production, just in time (JIT) and
kanban, Japanese factories were on average 35% more efficient than their
European counterparts. This was a considerable figure as purchasing and
manufacturing accounted for 63% of the value chain (refer to Exhibit 2 for the
value chain). This report indeedchanged the world of automotive manufacturing
as non-Japanese manufacturers tried to catch up with these skills. They were soon
transferred to many other industries.
During the 1990s the car industry had been characterized by a high rate of
innovation in products and processes. Customers were increasingly looking for
lifestyle/niche models. Until 1987 the car market had been grouped into 9segments,
but by 1997 it consisted of 26 segments. Some market researchers could already
foresee 50 or more segments by the year 2005. In fact, light commercial vehicles
(minivans, jeeps and pick-up trucks) accounted for half of all vehicles sold in the
US. Customers also demanded more efficient engines, e.g. diesel engines grew
from 14% of the European market in 1990 to 30% within 10 years...