Volkswagen of America: On the Move?
August 27, 2007
Reports have circulated, but have not been confirmed, that Volkswagen of America is seriously considering moving both of its headquarters and the headquarters of both of its brands –- VW and Audi -– from the Detroit area to new headquarters...well, elsewhere.
The reports are so strong that word is Michigan GovernorJennifer Granholm intends to step in and try to convince VWoA to stay put. The company’s U.S. headquarters are in the Detroit suburb of Auburn Hills, not far from Chrysler.
This is not the first time Volkswagen has been rumored to be leaving Detroit.
About 18 months ago or so, the head of the Audi division discussed over a dinner attended by other reporters besides me his desire to move Audi out of Detroit. He said, in fact, studies on other locations had been conducted. New Jersey was near the top of the list.
He gave a number of sensible reasons (as well as some personal ones) for moving Audi’s headquarters: Audi should be located in its strong markets. Audi can’t recruit and keep great talent because people working in Detroit want to work for the Big Three, with their bigger marketing and advertising budgets. Audi can’t attract talent from other areas, like New York and Los Angeles, because Detroit is seen by outsiders as an unattractive place to live.
I wrote a story for the Detroit Free Press. Audi vehemently denied the story. I was attacked in internal emails –- passed along to me -– for making it all up, though no one ever called me to say I was wrong. (How could I make up that level of details? And I had witnesses -– other reporters –- ticked that I got the scoop, which frankly wasn’t a total scoop since trade journal Automotive News had hinted at it before, which prompted the dinner discussion in the first place.
When the furor died down, Audi then signed a five-year lease on a new headquarters building –- in Auburn Hills, Michigan.
Now, some of the same discussion I heard more than a year ago is emerging, including the fact that VWoA wants to move to an area where it is strong in sales.
VWoA reportedly is looking at a number of cities on the West Coast, where Audi’s sales are strongest, and the East Coast. VW’s sales are split between the two coasts. Virginia also has been mentioned as a possible headquarters site, reports say.
Unnamed sources are telling media outlets, including Automotive News Europe, that VW wants to shed employees from its money-losing American subsidiary; VW lost $1.1 billion in 2005 and $795 million in 2006 in North America. VWoA employs 1,500 people in the Detroit area. Surely some of them are die-hard Detroiters who would refuse transfers. Look what happened to Nissan when it moved to Nashville -- half refused transfers from California to Tennessee.
The same sources tell media outlets that the search is very serious, part of the company to turn around the business and tied to a corporate by new CEO Stefan Jacoby, who assumes his job September 1. Reportedly, Germany and a group of Jacoby lieutenants sent to the U.S. to assess VWoA operations are heading the possible move.
Posted by Michelle Krebs at 11:58 AM under Companies , Rumors | Comments (11) | digg this | Seed Newsvine
Before the present structure of Volkswagen of America was established, they had a system of regional distributors who acted as agents between the factory and the dealer. This system is admittedly inefficient today, but the effect it had was to spread out VW’s employment around the country. I wouldn’t be surprised to see them return to one of the cities where they had operations in the past. Prior to consolidation, the Midwest region was served by administrative and warehouse operations in Columbus and later Dublin, Ohio. As a result, the Jetta, Passat, and Rabbit are a common sight on central Ohio roadways, even today.
Currently, VWoA has conflicting goals. First, they want to make money, but second, they want to locate in a place that is attractive in terms of being able to get good people and ideas going. If they move to one of the coasts, costs for both personnel and property will soar way beyond what they have to pay now; but if they stay in Detroit, they feel as though they will be stuck in a rut. Returning to my earlier point, if they located in the Columbus area for instance, they could have a relatively low cost of doing business, and yet be located in a city with a much higher quality of life compared with Detroit. Thus I wouldn’t be surprised to see a compromise location, not necessarily Columbus, but perhaps Charlotte or a city with a similar profile. They would probably find more VW owners per capita in almost any metro with over 500,000 people than Detroit. The close ties to the big three in the big D make driving anything non-DCX/F/GM socially unacceptable.
All this is of course speculation, but given the issues they face, I wouldn’t be surprised to see part or all of it come true. As a loyal VW owner myself, I lived through the early 90’s when they sold only 43,000 cars one year and nearly called it quits. It would be such a shame to actually have it happen.
Getting to the heart of the matter, Volkswagen needs return customers. I hear time and time again from former VW owners who left the brand that they liked the car, but the quality may have been so-so and the dealer was absolutely abysmal at dealing with any issues not to mention outright rude. You can move your headquarters wherever you want, but that fact won’t change unless a complete overhaul of the sales and service network is undertaken, as well as a greater emphasis on quality issues.
Posted by: Ben | August 28, 2007 at 1:52 PM
Wow, I take it Ben has never been to Michigan or Auburn Hills. Some of the best talent in the automotive world is in this area. You would be hard pressed to find such talent in such a small area anywhere else. I happen to have been to all the area's Ben has mentioned and I am sorry but NONE of them offer the quality of life of Michigan. You can be in a very rural and very beautiful area in a matter of an hour or two in Michigan. You can see some of the top live shows and artistic talent in every segment of entertainment in Michigan. Some of the top talent in the world was either born or has lived to Michigan. It has the richest zip code in the country. Michigan is NOT Detroit. Auburn Hills is no where near Detroit. Having said that Michigan is a very hard place to compete. Most talent, both automotive and entertainment, have had to look elsewhere at times because it can be hard to compete. Michigan is not all that corporate friendly however. A lot more can and should be done to keep producing and retaining top talent in Michigan. I have traveled, worked and lived else where in this beautiful country of ours. The United States of America is incredible everywhere, but I keep coming back to Michigan. The entire automotive management industry needs an overhaul. Each company has their strengths and weaknesses. They all have the raw talent to do an incredible job, unfortunately that talent has not been realized for quite some time. There is frustration in the customers as well as the employees. I wish I could offer answers, but being located in Michigan can be a HUGE asset, not a liability, in the right managements hands.
Posted by: Mike | August 29, 2007 at 8:23 AM
Well Mike, there may be plenty of talent in the area, but like the article says, it wants to work for the big three. I've been through Detroit many times on my way to Canada, and I had the misfortune of getting lost and accidentally getting off the freeway one time. That was rather scary. Although there are a few good things downtown like the Riverwalk and stuff, I avoid the rest of the city like the plague for fear of being shot or carjacked.
Quality of life is very subjective, and it depends very much on who you ask. Most people I know think of Detroit as a hell hole because of the decay and crime. That's about the assessment I would make as well. I realize that the suburbs are nice and wealthy, but honestly, who cares? What you have in the big D is the big Donut. That is, nice areas surrounding the wasteland that is the city proper. Nobody goes to a city to "see some great suburbs". I don't travel to Washington D.C. to see Fairfax, Virginia even if it is a nice place. I go to see the National Mall, White House, Smithsonian, etc. All the truly desirable cities in the world have a desirable city proper.
Even if there are good things going on there still, the perception of the area is just really bad. That is exacerbated by the poor condition of the roads and the number of abandoned buildings. Not to mention the smelly welcome one gets when driving into South Detroit due to the Marathon oil refinery. I'm always glad to get back to Ohio cause then I don't have to dodge monstrous potholes every quarter mile.
I honestly feel bad for the plight that the city and state have seen. I hope for their sake they can turn things around, but at this point it's not looking good. VW is probably leaving what it sees as a sinking ship, which of course will make it sink lower. It's a downward spiral, and short of a miracle, it's probably going to continue for a long time to come.
Posted by: Ben | August 30, 2007 at 6:54 AM
Michigan is the home of the BIG 3. An importer does not have any business being there unless there is a port of entry for their vehicles. Another reason for the move is that people that have worked for an importer such as BMW or Mercedes do NOT want to move to a state that is in such turmoil where the economy is horrible. I know people that have bought homes in Auburn Hills last year and they are worth 40K less than what they paid last year.
Even Ohio is not acceptable. If you look at the history of all imported vehicle manufacturers, all of the home offices are either in CA or NJ. Honda and Kia are in CA for CA is the first state the ship hits when shipping vehicles to the United States. BMW, Mercedes are in NJ for the same reasons.
If VW/Audi were to move to the Northern VA area, they are in for a culture shock. The prices for realestate are double than the prices in MI. So they might be jumping out of the frying pan into the fire.
Just my opinon, I have been working for imported vehicle manufacturers for 25 years and this sort of thing happens all the time. I have been through 4 moves myself.
Posted by: Nancy | August 30, 2007 at 10:47 AM
Just a quick note, Honda of America manufacturing is based in Raymond, Ohio. Toyota motor manufacturing is located in Erlanger, KY which is technically part of Cincinnati. Nissan just moved all of their HQ to Nashville. The times they are a changin'...
Posted by: Ben | August 30, 2007 at 3:10 PM
The man who founded Temple University told a story called "Acres of Diamonds" while convincing people to donate to the cause of founding the university. I hope the people who are handling the possible move are familiar with it.
Posted by: Nobody Knows | August 30, 2007 at 6:34 PM
Honda in Raymond Ohio is where the manufacturing plant is.Toyota has a manufacturing plant in KY. Their HEADQUARTERS are not in these states. They are both on the west coast. VW is eventually going to build a plant in the US likely in North Carolina but their headquarters will not be where the plant is. It will most likely be on the east coast.
Posted by: Nancy | August 31, 2007 at 5:28 AM
Since when is North Carolina not on the east coast?
Posted by: Somebody | August 31, 2007 at 7:50 AM
Ben is from Ohio! This explains everything! (Just kidding!)
Detroit being a hellhole is the sentiment of the baby boomers, but thankfully they're starting to die off. I give credit to those who have begun to rediscover their legacy via sold-out Tigers games, but the rest of them can just rot until that idea is gone.
VWoA leaving Detroit has nothing to do with Michigan being a "sinking ship" and everything to do with VWoA being a sinking ship. They're still leaving a coterie behind because like all automotive companies, you MUST have a presence in Detroit. It still is the automotive capital of the world.
Posted by: AH | September 08, 2007 at 9:56 AM
I agree with Mike. There is alot of talented automotive people in MI (altleast there were, many have left). It's a shame. The biggest contributor to poor profits is product and quality. The Sr. Executives are responsible for manufacturing good products not those who manage the people and/or daily tasks. VW/Audi have the products. As an owner of an A6 and many in my past, I've enjoy these vehicles. Moving to another state will not improve the quality. Hopefully they will hire talented people who will get the company on track.
Posted by: DL | September 15, 2007 at 10:29 AM
I agree with Mike. There is alot of talented automotive people in MI (altleast there were, many have left). It's a shame. The biggest contributor to poor profits is product and quality. The Sr. Executives are responsible for manufacturing good products not those who manage the people and/or daily tasks. VW/Audi have the products. As an owner of an A6 and many in my past, I've enjoy these vehicles. Moving to another state will not improve the quality. Hopefully they will hire talented people who will get the company on track.
Posted by: DL | September 15, 2007 at 10:30 AM