Volkswagen's Jacoby: HQ Move Tip of the Iceberg
September 06, 2007
By Bill Visnic
In a conference call with journalists following Thursday’s announcement that Volkswagen of America Inc. will move its headquarters from the suburbs of downtrodden Detroit to tony northern Virginia, new VWoA president and CEO Stefan Jacoby insists the relocation is much more than a change of scenery: this time, VW intends – really intends – to change its thinking.
Jacoby says the move is the beginning of the company’s urgent, there-is-no-tomorrow philosophy to re-connect with customers and offset years worth of brand-management missteps. In addition, macroeconomic forces have built up, demanding a more focused attack in the increasingly challenging U.S. market.
He says the strategy is based on addressing five crucial areas: product, brand positioning, its dealer network and its internal organization. Ah, but that’s only four. The fifth point – the very real possibility of VW building a new U.S. assembly plant – is the most provocative.
The following are some select snippets from Jacoby’s question-and-answer session:
Are you taking the possibility of local (U.S.) production into strong consideration?
“This is a balancing act (for a German automaker) to make products specifically for the U.S. Volkswagen has to be positioned more in the main, volume segments” of the U.S. market, where the premium-vehicle intensive German thinking traditionally has not been well-suited.
“This is exactly what we are considering and investigating. There have been no decisions made yet.
“In respect to location, we will take into consideration the German supply industry (currently based in the U.S.)," as well as any potential new plant’s proximity to existing German competitors Mercedes-Benz (Vance, AL) and BMW AG (Spartanburg, SC).
Jacoby says nearness to its German competitors is regarded as advantageous in some respects and undesirable in others.
Jacoby says the company must determine how a U.S. production facility would best serve not just VWoA, but the holistic needs of parent company Volkswagen AG.
The decision to produce vehicles in the U.S. must take into account how much engineering would need to be undertaken in this market, cycle plans for existing or new models, and whether Volkswagen would want – or need – to export models made in the U.S.
He will not say if the company has a target for when a U.S. plant, if approved, needs to be up and running.
How much does the euro/dollar exchange rate factor into the argument for a U.S. plant?
“The dollar exchange rate is like a marathon and you have to start 10 miles behind the starting line. The macroeconomic basics are against us.”
Volkswagen is shedding roughly 30 percent of its employees in the process of moving to Virginia – have you quantified the savings that will result?
“Yes, but I won’t tell you.”
That’s because the cost savings from VW’s HQ relocation ultimately will not be the sole savings the company enjoys, he says.
“The restructuring we’re doing right now is not the only restructuring we’re doing. We will strengthen our regional structure so there will be synergies with what we are doing in other markets.” Jacoby says this also will enable the company to use standardized “internal benchmarks” used worldwide.
Is there anything Michigan could have done to keep Volkswagen?
“Actually, no. Our market is not Michigan, unfortunately. When we came to Michigan 30 years ago, it was not a decision against New Jersey (VW’s original base)."
The company has set an objective for the U.S arm to be profitable by 2009 (VW lost more than $800 million in North America last year and has not been profitable since 2002). Is that realistic?
“We have an objective to reach break-even by 2009. I see a good chance to reach that objective.”
How will this move and restructuring affect the dealer network? Do you plan to add dealers, or streamline the dealer network?
"I’m talking about happy dealers. We have no major changes (planned in dealer numbers) – this is not on our agenda. Being better in customer satisfaction is on our agenda.”
Posted by Michelle Krebs at 4:17 PM under Commentary , News , Personalities | Comments (14) | digg this | Seed Newsvine
Ummmm, do the five points include beating Toyota quality? That's a huge liability right now, and one that they absolutely cannot afford to miss. None of this B.S. about perceived quality either. It doesn't matter how nice the interior looks when you are stranded in the wilderness with a bad fuel pump.
As for the dealer network, I'll believe the improvements when I see them. Currently, the system is so badly broken. If I have a bad experience at a VW dealer and report it on the follow up call, the dealer will often call me back and YELL at me for giving them a bad score. Unbelievable. I've read stories where the dealer has told the customer never to do business with them again. Now that's customer service if I've ever heard it. Basically what they need to do is fire all their dealers and sign up the ones that do a decent job (fortunately I found one that does now).
Still, most of the problems in dealing with the dealers would be fixed if the cars had better quality. Don't get me wrong, my '06 Jetta 2.5L has been brilliant and has had no issues whatsoever, but I regularly read online forums where people with a new Passat or GTI have had major issues.
OK VW, here's my five point plan for you:
*Quality
*Quality
*Quality
*Quality
*Hmmmm, oh yes I remember now. Quality.
Posted by: Ben | September 07, 2007 at 5:06 AM
Ben, what a great comment. Quality is the missing piece for VW's success. They are great cars but need quality improvement. Just look at the latest quality surveys. VW is always among the worst.
Posted by: Axel R. | September 07, 2007 at 6:56 AM
I discovered that in Canada, you can get the Gen IV Jetta/Golf as well as the current models. The Gen IVs go against Toyota Aygos and the Koreans on price, the Gen Vs against the big boys on style and content. Given that stateside, the Gen V Jetta is still apparently selling worse the the Gen IV in its last days, VWs whole US strategy seems screwed. Alternately, why they didnt simply take the Skoda Octavia built on the Gen V platform and get it to market 2 years before the Gen V Jetta finally arrived beats me. It could have sold at $3k less than the Gen IV it would have replaced, and it actually looks better, too, inside and out. VW product planning for the US is a complete disaster. They must think we live on a remote island without contact with the rest of the world. Earth to Wolfsburg! Ever heard of air travel? Or this thing called the internet? Sad to say, we are driving the last VW product I intend to purchase. One shouldn't reward stupidity with more business. Or I should try to find a Phaeton after all, with residuals at 35% after 2 years.
Posted by: Roger | September 10, 2007 at 10:25 AM
Speaking of Skoda, maybe VW can consult with them about improving quality. It seems silly for a former Soviet Block company to be the global leader (even above Lexus!), but hey, that's the way the world works these days.
Top Gear Survey: http://www.topgear.com/content/carsurvey/2006/features/08/2.html
Posted by: Ben | September 12, 2007 at 6:45 PM
I owned three VWs and had nothing but quality.....problems and big money losses. I owned them because I worked for a marketing company that represented VW at the Auto shows and other events: JHA marketing,Inc.. I have never worked with a group of people who knew so little about the product they represented. One of the questions asked of the 'Product Specialists' was -- How many cylinders are there in a 4 cylinder engine? Several 'Product Specialists ' did not know the answer. Poor quality was throughout the system. I think the message of poor quality in every area of the VW operation has really hit the fan.
I know Mr. Jacoby from the Detroit Autoshows I attended over the last 7 years. I do wish him well and I think that they are now, finally, on the right track. Good Luck and follow the five point plan of BEN who commented above. The answer is as simple as that. Alan Scott
Posted by: Alan Scott | September 24, 2007 at 10:42 AM
Product, Brand, Dealers and Internal Organization? Isn't that just about everything? Maybe we should ask what doesn't need fixed?
A much better formula would be to let VW design the handling and cosmetics and then hire some 17-year old Japanese kid to run the electronics, alternators, fuel pumps, engine, transmission...
Seriously, today I fit the VW Passat profile (upper income mid-30s) and am buying a new car within the month, but I'm just too scared to buy the Passat. There is no margin in my life to screw around with broken fuel pumps and windshield wipers.
The Passat is like the pretty girl you want to date, but wont take that plunge because you know she's going to be a head-case. So I'm probably off to buy the new Accord, it's like safe missionary sex compared to the Passat, but at least I know she'll be ready to go when I want to go.
Posted by: Chuck | October 03, 2007 at 8:45 AM
VW, like every car company, has had some quality issues. However, they were alot worse in the late 1990's/early 2000's than they are now. JD Powers actually ranked VW as the biggest quality improvement for 2007, and they have since moved up in the quality ranks.
Japanese cars are honestly not better than the European and American manfacturers. They may have been 20-30 years ago, but that is no longer the case. What the real reason is behind the perceived better quality is a little something the marketing industry calls brand perception. The only reason why the Japanese are perceived as better is because they are still reaping the benefits of the better quality they had 20-30 years ago. And unfortunately, brand perception is something that takes years to change... especially when people are guillable enough to fall for it in the first place.
Posted by: Kelly | November 11, 2007 at 2:45 PM
Absolutely the worst customer sevice department on the planet. They are completely incompetant. It's like talking to one of the Stepford Wives from the movie of the same name....they are very polite and nice but absolutely no substance. My wipers have broken twice in two back-to-back snow storms strandening my wife and children for FOUR HOURS...TWICE!!!! But they assure me it can't possibly happen again.
Mr. Jacoby states that Michigan is not his market....of course its not his market.... it actually snows there!!! They will do much better in Virginia where its more temperate.
My advise to any potential customers....go look at Toyota, Honda or even Hyundai.
Posted by: Dave B | December 14, 2007 at 10:50 AM
I hope he (Jacoby) fails and have very little doubt he will.
After dealing for years with VW and being patient on what I used to call "quirks" and thinking the small problems are just a part of the charm and a few isolated incidents, I felt the full impact of the careless of VWoA.
My GTIs manual transmission fails after 39K miles. Completely blows chunks out of the tranny and all that VWoA can claim is that a small nick on the housing coling fin means they can not warranty it.
Good luck VW. I was a loyal fan and your crappy attitude has soured a lifelong buyer. I was in the market for a new Audi (afetr already buying a new A4) and a GTI as a daily driver. Needless to say I will never buy one. More than 8 years of VW ownership have finally opened my eyes.
Posted by: Alex S. | January 07, 2008 at 1:08 PM
VW customer relations needs work. View my web page at: http://www.reesphotos.com/VW/
Posted by: John Rees | February 05, 2008 at 10:45 AM
Where are all of the loyal VW owners here? I own my 4th VW and I am very happy. From my first Fastback to my New Beetle, I am a satisfied customer. Sure, there are random things that go wrong - I call them VW quirks. In any case, I think the one things that VW does have that other major car manufacturers don't is brand loyalty. I for one, will remain loyal.
Posted by: Kelly R | February 27, 2008 at 4:23 PM
Where are all of the loyal VW owners here? I own my 4th VW and I am very happy. From my first Fastback to my New Beetle, I am a satisfied customer. Sure, there are random things that go wrong - I call them VW quirks. In any case, I think the one things that VW does have that other major car manufacturers don't is brand loyalty. I for one, will remain loyal.
Posted by: Kelly R | February 27, 2008 at 4:24 PM
To Kelly November 11. Do you actually believe what you are writing? Japanese vehicles are no better than their Euro or American counterparts. Although I do think the reliability gap has shortened modestly, I don't think you're comments are remotely accurate as measured by JD Powers, Consumer Reports or general commentary on Edmunds. After my rant on October 3, my wife pushed for the Passat 2.0 Sport and I caved. It's a fun car to drive and has many more thoughtful features than an Accord or Camry, but with less than 1K miles I've already (1.) replaced air bag sensors, (2.) find the brakes are very rough and over-rought and (3.) have relentless squeaks and rattles in the dash and armrests where VW saved probably $0.10 per car by going with a cheaper plastic. How did VW ignore the early road-tests on this car, which would have clearly signaled (believe me it's loud and tremendously annoying), that there are some materials used that are very substandard, resulting in headaches for the owner. I'll just have to turn up the radio I guess.
Posted by: Chuck | May 06, 2008 at 9:26 AM
VW and Jacoby have a long way to go on customer service and quality. View my VW experience at http://www.reesphotos.com/VW/
John Rees
Posted by: jrees | May 27, 2008 at 7:22 PM