We’ve counted ourselves among the many who laughed bitterly when Volkswagen first announced that it was campaigning to overtake Toyota as the top volume automaker in the world. Well, Automobilwoche Editor Guido Reinking has penned a column for Automotive News [sub] arguing that VW’s Mission: Improbable might just stand a chance. Surprisingly, the column is not a paean to German sachlichkeit in the nationalistic mold of most mainstream German auto journalism. Instead, Reinking makes a bold claim: Toyota, long the 800 pound gorilla of global automakers, may be losing its aura of invulnerability. First he points unconvincingly to Toyota’s 32 percent drop in US sales for the month of September, “worse even than the fall taken by sickly General Motors.” Sure Guido, but keep in mind that those are previous-year percentages, not apples-to-apples…
Reinking hits his stride when he argues that “contrary to popular perception, Toyota Motor’s dazzling growth during the past 10 years has been led by light trucks, not the fuel-efficient small cars and hybrids that are so associated with the Toyota brand.” he points out that Toyota’s “profit is projected to decline as much as 40 percent this fiscal year, which would yield a margin of barely 6 percent. That would put it on VW’s level.” What he doesn’t mention is that Toyota’s profit is dropping because it, unlike VW, has actually been selling cars in the US, and so has market share in the world’s largest auto market to lose. Though VW’s neglect of the American market can now be spun as crafty avoidance of the recent downturn, VW will still have to step its game up to truly challenge Toyota. Besides, VW is still playing catchup in the crucial segment of mass-market hybrids. Kudos to Reinking for making a controversial call, but without more evidence it’s hard to picture VW passing ToMoCo anytime soon.
They talk big for guys who only dominate the worst of the worst used car list…
To be realistic, it is hard to imagine that VW will weather the economic storm in US. They selling something in the neighborhood of 200K vehicles in a good year. Is it worth while to keep huge organization in order to sell 100K vehicles if recession strikes? Recession is here already.
Porsche has just essentially bought VW, as you probably know. They now own 74 percent of the company.
I dont know if VW can top Toyota globally in sales anytime soon, but I would say that Toyota’s halo is off.
Right now if I had to call which manufacturer would unseat Toyota as worlds leading automaker, I would guess Hyundai, years from now of course.
I disagree with some of the rationale in the article but I agree that Toyota has seen its peak. Toyota’s arrogance was evident when it took top spot.
Best in reliability? Not anymore. It’s trending down.
Style leader? Um, not so much.
Most economical? A couple of models maybe. Tundra? Sequoia? LX470? LS series? New Scions? Also trending down.
Cheapest? No.
Safest? Average perhaps.
Brand perception? On a wane.
If GM/Ford marketing could paint some of the current economic crisis onto the shoulders of our deficit bloating “furrin” auto companies, we could see some real market decline.
What’s the point of being the world’s largest automaker? The point of any company is to be the most profitable.
The previous world’s largest automaker, and still 2nd largest automaker, is practically worthless. Despite huge revenues it makes no profit.
I doubt anyone is going to unseat Toyota as number 1 in volume for a while (except for GM, temporarily, if they buy Chrysler), and nobody should particularly want to.
When thoughts of purchasing a vehicle intrude upon my thoughts VW never enters that train of thought whether I am pondering a new or a used vehicle.
Passat means “check engine” in German. They are wearing some very rosy glasses on the sales front these days to believe that kind of hype. Toyota will continue to crank out Camrys, Corollas, Scions and the like left and right. That’s not going to change anytime soon.
Yes, they have been slapped by the economy and fuel prices just like everyone. The difference is that they actually have reliable small cars to go along with them that are for sale in the U.S.
I’m curious as to the comments on waning reliability. Source?
An example on safety… the Camry is actually rated 5 stars all around vs the Accord’s 3-star rear side rating.
I’m curious as to the comments on waning reliability. Source?
Consumer Reports put the 6 cyl Camry and Tundra on their “cars to avoid” list, a first for Toyota.
John
I think CR revoked that status this year on those models.
Eh, I dunno. I’ve never owned a Toyota, but while they aren’t perfect they are going to be the force to be reckoned with for many many years, and frankly if it takes GM level stupidity 30 years to kill a company, we’ll all probably be dead before Toyota loses its grip.
JK43123, Sure. But the 4-cylinder Camry is NOT on the “cars to avoid” list. That’s the bulk of the sales. They’ve made far more people happy than otherwise.
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What halo? Half the auto world thinks Toyota has cloven hoofs and horns.
Is Toyota a force to be reckoned with? Yes.
Will this change any time soon? No.
I see three very important strengths/indicators for Toyota:
1. Toyota can build a $11-12K car in a high-wage country and the people who buy these cars are happy with them.
2. Toyota can build a $22K 50mpg mid-size hybrid car in a high-wage country and make a profit on it. Hybrid powertrains are a key technology for the near-term and Toyota is in the catbird seat.
3. Toyota has the financial resources to turn around any of a number of problems or weather an economic storm without letting operations go to the dogs.
And that war chest means a lot. For example, any perceived quality problem can be fixed with a killer warranty. The extra warranty cost won’t hurt them all that much, because their cars really are very reliable down the road and they can probably raise prices to cover part of any increased warranty cost. The cost of meeting this challenge will put a world of hurt on GM, Ford and Chrysler.
Maybe VW is planning on giving away a free donor parts car for every car that they sell, and that’s how they’ll improve their volume.
Consumer Reports put the 6 cyl Camry and Tundra on their “cars to avoid” list, a first for Toyota.…
Actually, that is incorrect. When the Camry was first introduced in ’83 (84?) it ended up on the used cars to avoid list because of some kind of persistent idle problem. CR itself mentioned that it was an unusual place to find a Toyota. This, of course did not cover rust problems. Not that this is relevant to today of course. Way more relevant is the fact that CR no longer gives automatic recommended status to new Toyota models that it likes. This is mostly due to the serious reliability issues related to the Tundra. Automatic recommended status is reserved for Honda and Subaru if I recall correctly. This, of course, only means something for those who worship at the altar of the peanut butter and toaster testers…
Toyota’s halo is off.
Bite your tongue, good sir! How dare you speak such blasphemy?
To dethrone Toyota is the gist of VW’s “Strategy 2018.” According to that piece of Non-Clausewitz doctrine, come 2018, VW will have unseated Toyota in sales, profits, customer satisfaction, innovation (and countless other) areas. It wouldn’t surprise me if the strategy calls for VW speaking – sumimasen – better nihongo than the Japanese. In other vords: “Viz ziz strategy, ve vill rule der vorld.”
When the paper was out, comments from friends I still have at the factory ran from “yeah, sure” to “friends don’t let friends type drunk.”
Now hear this: Strategies that go a decade out have always been en vogue in Wolfsburg. (I should know, I penned parts of several – anybody recall V.A.G ?) Writing those 10 year plans has always been an utterly safe task, free of any retribution.
My private statistics put the median shelf-life of a VW CEO at 6.16667 years – if you discount Nordhoff, who ran the company for 20 years. Nobody after him ruled longer than 10 years. Hahn came close: 10 years. Piech: 9.
So when we wrote those forward-looking epics, senior management privately said: “What the heck, in 10 years, I’ll be retired.”
As far as I can remember, nobody has ever been castigated for not making their 10 year plan. When a new CEO comes, he brings in a new team of management consultants, they write a new 10 year strategy, and the old one is quickly punched and hidden in a dusty Leitz-Ordner. Or worse, the former bible is turned into the works of the anti-christ. If a CEO doesn’t last longer than the standard radioactive half-life, all traces of his history are usually eliminated anyway. Pischetsrieder? Never heard of him. No such name. No such number.
Disclaimer: I have nothing to do with that 2018 paper. Haven’t even seen it. I zee nozzink.
What a difference a few CEOs make.
When Piech took over from Hahn in 1993, his then strategy to turn VW around was called “kaizen” – that’s Japanese for “improvement” and it was a deep bow in the direction of Aichi. “Kaizen” didn’t get traction in Wolfsburg, so Piech reduced it further to the “Spaltmass” – the gap between body parts. The less, the merrier. (Jeez, the Spaltmass-Mania got even so far that we had to retouch photographs to give the cars the mandated tight slits.) THAT instantly changed more than any “we’ll get Toyota in 10 years” ever will.
Toyota just announced that so successful has been its “Saved by Zero” campaign that it will extend it.
Huh? If it was successful, don’t they not need it anymore?
One more piece of VW trivia, then I stop – for today. All new strategies must first overcome institutionalized inertia and suspicion. From senior management down to the rank-and-file, new strategies are being observed for at least a year whether they are still alive. “After a year, if they still talk the plan, then they must be serious,” a VW manager taught me. “Before, applaud the plan, but don’t waste your time implementing it.” Piech called that “die Lehmschicht” (the “layer of clay”) he had to dig through to make changes. That layer of clay should be quite challenging for the boys from Porsche. At least, they’ve got history on their side: “Hey, my dad worked here before you did.”
Bertel Schmitt> You provide very interesting information! In your perpective what stops VAG from being as successful as TMC?
VoiceOfSweden: First, VAG is no more. (If anybody’s interested in the true story behind this unexplained acronym, beg me, and I’ll tell it. Sneak preview at http://en.wikipedia.org/wiki/VAG_Rounded …. )
What makes VW less likely to rule ze vorld than Toyota (or, bless their hearts, a combined GM, Chrysler, Ford, Pierce, Fenner & Smith? )
– Arrogance. VW’s engineers see the market through German/European glasses. They never could understand why the rest of the world doesn’t want to drive a Golf. They always HATED the Jetta. I still remember: “Cupholders? They want to drive drunk?”
– Myopia. Until recently, they treated China as a joke. If someone did something really bad in Wolfsburg, he had two choices: Leave, or go to Changchun, VW’s Siberia. When someone went there, the automatic question was: “What did you do?” Has changed a little bit in the last 3 years. Well, China makes more VWs than Germany, someone had to notice.
– Complexity. Their cars are over-engineered. A new VW has more computers than a mid sized company. Workshops overwhelmed. Too many parts. Many warranty cases are due to misunderstood features.
– Quality/Customer satisfaction. An epic and usually losing battle.
Do I need to go on?