VW Recall in China

Volkswagen is recalling over 384,000 vehicles in China (models include Golf, Polaris, Jetta and Magotan) after China Central Television criticized the direct shift gearbox transmission on the cars, claiming there was glitch causing the cars to speed up and slow down unexpectedly. The recall will cost the company $6 million in order to replace all the gearboxes, but not only that, they will most likely face further repercussions as far as potential lawsuits for personal injuries and wrongful deaths. Additionally, in 2009, Toyota received a $17.35 million fine for their recall due to faulty breaks. VW may be facing a similar sized fine from the Chinese government, if not higher. 

Perhaps the most damaging consequence of all is the company’s reputation. Consumers in all countries may lose confidence in the reliability and safety of the brand and may be disinclined to purchase the vehicles in the future. Toyota is still suffering the consequences of their recall back in 2009 so there’s no telling how severely VW will be affected by this.   

Best Buy Case Study

I really really preferred the way we discussed the case in class today. It gave everyone who wanted to interact an opportunity and the discussion was far more thought provoking and informative than when we’re broken off into groups. I feel like in group settings, one or two people dominate the whole conversation and it’s always a fight as to who’s going to present for the participation points. I personally don’t do well in those situations, so this was a really refreshing format. 

Volkswagen finally gaining traction in the US Market

In 2012, VW reported 438, 133 vehicles sold (a 35% increase from the previous year). This is huge momentum for the brand that is widely viewed as a “niche” brand in the US with very low sales volume. 

Rainer Michel (Vice President of Product Market and Strategy) said VW needs to produce a family friendly SUV in order to maintain its momentum in North America. It does well with its Jettas and Passats, but this is a very large market segment they have yet to satisfy. The company debuted the CrossBlue at the North American Auto Show in Detroit and the company plans to choose a North American production facility within the next couple of months. 

Michel states an SUV is necessary in order to meet the lofty goal the company has of selling 800,000 VWs and 200,000 Audis in the United States by 2018. 

I think this is a very smart strategy on the part of VW. It seems fairly obvious that the company only sells to a very small and very specific group of customers in the United States and in order to broaden their horizons, an SUV needs to be produced. The business-level strategy of “who are their customers?” can be answered, but I do not think that they have enough customers to make any significant impact in US sales. 

VW cuts bonuses to German workers by 4%

Despite reporting record profits and revenues, Volkswagen announced February 27 that it will be paying bonuses of 7,200 euros ($9,400) which is a 4% decrease from last year. Additionally, the CEO, Martin Winterkorn was paid a measly 14.5 million euros down from 17.5 million last year (what a tragedy–how will he eat?). The company says that it is cutting bonuses for factory workers and executives in order to prepare for stiffer competition this year. It can also be speculated that VW is trying to appease the general public after the outcry they received for giving out excessive bonuses last year.

Hopefully cutting salaries will lead to larger profits this year, but only time will tell.

VW Golf named Europe’s Car of the Year

On the eve of the Geneva Motor Show, the Volkswagen Golf dominated the competition for Car of the Year. It received 414 votes with the Subaru BRZ coming in second with only 202 votes. This is a very important honor for the company to receive because it gives consumer’s an idea of what the experts think of as the “car of the future.” However, the all-new Golf isn’t expected to replace the U.S. version until next year. 

For VW’s business, this could prove to be a huge boost to their profitability for the year. Since the average VW owner may not necessarily be a car expert, its customers will rely heavily on the opinions of those they value. This could bring in more sales at least from the European division.