Volkswagen USA: Will product diversity help Volkswagen UK overcome the adversities it has been facing?

Abstract

"Among the many car manufacturers who have created a buzz with their many models, German car makers occupy a special place in the world. One of the German manufacturers, who has managed to carve a niche for itself, is Volkswagen.

Volkswagen of America, (VWoA) as it is known, is the North American subsidiary of the German parent company Volkswagen AG. Volkswagen America manufactures under five brands: Volkswagen, Lamborghini, Bugatti, Bentley and Audi. It has two broad categories of cars, one for the traditional driver and the other for the performance minded driver. It also offers leasing and credit services through its wing called Volkswagen Credit. The company started operations in Englewood Cliffs, New Jersey in 1955, recently, headquarters was shifted to Herndon, Virginia, from Fairfax County in 2007.

VW USA has about 800 dealer locations in 50 states, and has 20 corporate or subsidiary locations. Despite the auto market being a little sensitive, as the world recovers from the global financial crisis, car sales for VW picked up in 2010. Volkswagen sold 256,830 cars under the VW brand and 101,629 Audi cars in 2010, which is an improvement from 213,454 and 82,716 cars sold under the VW and Audi brands respectively, in 2009.

Though Volkswagen had increased car sales in 2010 and a profitable Q1 in 2011, the U.S market has proved to be a tough nut for it to crack. From the time Volkswagen started operations in the U.S; one can say that, although resilient, it has been trying hard to retain its lost glory of the 80s as its going through phases of growth and decline constantly; Also, competition from the Japanese, American and other German automakers has also added to the already existing problems. Volkswagen trailing behind Honda, Nissan, Toyota and Mercedes in overall quality did little to VW to face competition from General Motors, Ford and Toyota.

This competition, coupled with the threat of brand dilution, confusion between the Audi A4 and VW Passat, the risk of self-cannibalization among VW's various brands, Piech's bad relations with the Press, and his lack of relation skills, bad image of its management department, its bungled communication with its investors etc. seems to be posing many problems for Volkswagen in the U.S.

With the opportunities and threats in mind, Volkswagen seems to have charted out a course of action for what it intends to achieve by 2018, its corporate goal is to triple the sales in the U.S to one million vehicles by 2018. It is also looking at blending German engineering with American ingenuity.

The VW electronics research laboratory located at the heart of Silicon Valley has been running some R&D initiatives such as: Autonomous driving, e-mobility technology, Picture navigation, Connectivity enabled Eco-conscious Driving, The Navigation Companion Tool etc. As a result of these initiatives, VW intends to produce bigger and cheaper cars in North America.
Apart from the look that appeals to people, Volkswagen models have also been rated as the "top safety pick" by the Insurance Institute of Highway Safety. Though this portrays a positive picture about Volkswagen's quality, the company cannot deny that its users reported 131 problems per 100 cars in their Initial Quality Survey (IQS) of 2011.

This has tied the company in the 39thposition with MINI, in terms of quality. Volkswagen of America is also recalling about 71,000 Jetta Sedans as the cars have a wiring problem, which turns the car off when the horn is used. Despite its quality taking a beating, VW is willing and trying to discuss the problems with its users, instead of weaseling out of the problem and getting defensiveWill Volkswagen be able to recreate the magic it had created in the 70s in the US?"