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VW’s New CEO Makes Plans to Fill Niches in Expense of Former VW’s CEO’s Plans

In the news: Martin Winterkorn, Volkswagen’s new chief executive officer has released a statement saying that Europe’s largest carmaker and manufacturer of quality Volkswagen Cabrio parts intends to fill “lucrative market niches” with all new models as he tries to reduce excess capacity and boost profit.

In a letter sent to Volkswagen’s employees, Winterkorn stated that “The Volkswagen brand is far from tapping its full potential.” The new CEO of Volkswagen will make an official public statement on the plans for the brand after taking over as CEO of the Wolfsburg, Germany-based Group last January 1, 2007.

Volkswagen’s CEO said that he plans to beat a target of increasing the group’s pretax profit by fivefold to 5.1 billion Euros or .6 billion USD in 2008 from 1.1 billion Euros in 2004. The car maker said that the Volkswagen-brand plants operate at a mere 80% capacity, compared with 97% at Bayerische Motoren Werke AG and 93% at Toyota Motor Corp.

According to Stephen Pope head of equity research at Cantor Fitzgerald in London, “I am pleased that Winterkorn is looking at gaps in the VW lineup as the auto market is about niche designs as opposed to small-medium-large. The difficulty lies in the fact that the niche areas are already crowded.''

Supervisory Board Chairman Ferdinand Piech has named his long-time protégé Winterkorn as Volkswagen’s new CEO last November as replacement for former VW CEO Bernd Pischetsrieder. After taking over Volkswagen, CEO Winterkorn has immediately decide to reorganize the company and run the Volkswagen brand himself pushing out Wolfgang Bernhard whose last day at Volkswagen is until tomorrow.

Volkswagen’s shares is continuously rising and at present it gained 1.36 euros or 1.6% increase making the VW’s shares to cost 86.66 euros. The stock gained at least 76% over the last 12 months. Bernhard has planned to introduce new models to fill in market niches and that includes the introduction of a new version of the Sciroco sports hatchback, a compact sport-utility vehicle and a minivan that Volkswagen is building with DaimlerChrysler AG.

But unfortunately Winterkorn has plans of its own and his first agenda is to reconsider the proposed hybrid powertrain policy of former Bernhard. Similarly the original plan of introducing hybrid versions of lower-end models such as Golf and Jetta again part of the former CEO’s project was again revoked by new CEO Winterkorn saying that the whole project is too expensive to be successful.

In fairness to former Volkswagen CEO Bernhard Pischetsrieder, he has helped a lot in making Volkswagen into the giant it is today. It should be noted that just last year, 2006, Volkswagen models were the best sellers and take note in most market segments covered by Germany’s Federal Bureau of Motor Vehicles and Drivers (KBA). The German automaker has obtain 19.9% market share and 689,000 new registrations which further expanded the automaker’s undisputed leading position in Germany.

Stefan Müller, Head of Sales Germany, Volkswagen Passenger Car brand said that “Almost every fifth vehicle sold in Germany is a Volkswagen. Our young model range, combined with attractive financing and mobility programs such as the ‘anniversary package’, have convinced customers. The excellent sales performance in both the private customer and fleet customer sectors was also instrumental in bringing us the highest market share last year since 1994.”
The Golf which new CEO Winterkorn has currently put on hold has gain special position as Germany’s most popular car. As a fact, new registrations for both Golf and Jetta in December of last year totaled 21,659 units. The said figure corresponds to a segment share of 28.9% and so far the highest figure achieved both in the compact class.

In the MINI segment, the Volkswagen Fox held pole position last December with 2,649 new registrations or 19.6% segment share. The Polo defended its top position in the small car segment with 9,520 new registrations or 22.1% segment share. The Passat was another best-seller in the mid-class segment.
The Eos has also showed a remarkable development with a segment share of 15% and obtaining 1,211 new registrations in December of last year. The Volkswagen convertible coupe topped the German convertible market for the sixth time starting from its first launched in May 2006. The new Touran completes Volkswagen’s list of best-sellers. The Touran obtained 5,773 new registrations or 14.

About the Author: Growing up with three brothers, Natalie Anderson became exposed early to the world of automobiles. This 29-year-old account manager now dreams of having her very own top-of-the-line vintage car.

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