Tag: ferdinand piech

Wolfsburg worries

On By ChristofferIn Electrical vehicles, ev's, News, OpinionLeave a comment

It’s summer in the northern hemisphere and this year in Europe, we have one of the warmest ones in a long time, courtesy of a particularly large El Nino effect. If you’re into sports, and as if you needed more heat, the World Cup is currently entering its final stretch, as is Wimbledon. After that though, we’ll come to the more critical stages of the Tour de France. Who said summer was relaxing, at least if you’re into sports?

Many people wish for somewhat colder weather, and the management floor at VW headquarters in Wolfsburg certainly wouldn’t mind a bit less heat as well. I have no doubt that floor is nicely air conditioned, in contrast to large parts of Germany where for some bizarre reason, buying an AC for your home is considered a crime comparable to far darker days in German history. In the case of VW in 2026 though, all the AC’s in the world won’t help its current situation.

Back in October I wrote a piece here on the blog called “Is Porsche going bust?”. I concluded it wasn’t, and one of the reasons I gave was that Porsche is majority-owned by VW, in turn partly owned by the German sate of Lower Saxony. And as we all know, state officials shun bankruptcies and resulting job losses as much as Lance Armstrong shunned doping checks.

As it turns out, the question I asked in my headline in October was recently asked to the members of VW’s nine-person board: was there a risk VW could go bust? Six of them answered it positively. That’s not very recomforting.

VW management board. About as happy as they look.

Since then, the bad news have only gotten worse. A few weeks ago, VW confirmed they will reduce their headcount by 50.000 until 2030. This week, the number was increased to 100.000, equivalent to 15% of the company’s global workforce, and the closing of four VW/Audi factories was also announced. One of these is Emden, VW’s most recent factory and designed as the flagship site for its EV range.

It’s important to understand the context all this is happening in. Currently not much is going well in Germany. Growth is inexistent with GDP having shrunk by 0.5% in -24 and only grown by 0.2% in -25. This makes Germany, Europe’s largest economy, its 2nd slowest growing after Finland. Bankruptcy filings are at a multi-year high.

Since 2019 the country has shed over 300.000 industry jobs, corresponding to 6-7% of the industrial workforce. Much of this is the result of Germany’s senseless energy policy, giving the country the world’s highest energy prices, bar Ireland and some island in the West Indies. Companies far outside the automobile sector are increasingly moving operations to the US or Asia.

VW flagship EV plant in Emden. Now up for closure.

When things were still going well in Germany some 10-15 years ago and energy was cheap and plentiful (albeit Russian), Germany made roughly half its GDP from exports. And boy did they export, especially cars and especially to China. Of course, the Chinese being Chinese, copied as much as they could. And then one day, they had learnt how to build cars. In the meantime German energy had become expensive. It was still cheap in China though. And then, the US as the other critical export market imposed tariffs.

So much for the background, and that’s bad enough. However, the crisis is also of VW’s own making. Beyond an EV line-up that has gone from frankly disastrous to just a tad worse than anybody else’s, VW in the last 20 years has gone from a middle class car brand that combined practical family cars with some sporty highlights, to a middle class car brand that doesn’t build a single model worth remembering.

VW basically invented modern car mobility with the Beetle and when the Golf GTI was launched in the mid-70’s, it started off the whole hot hatch segment. The GTI is still around, but the last generations have been so uninspired and deprived of any emotion that I know several people who just never bothered upgrading to the new model. And who can forget the old VR6 and G60 models?

The Passat was always a rather boring family car, but then someone in Wolfsburg came up with the idea to put a W8 in the top model. And of course we all remember the Touareg SUV and its crazy six-litre, W12 engine, also fitted into the Phaeton, VW’s expensive attempt to build a luxury limousine. Sure, VW was mostly a family car brand, but just under the surface, there was a bit of craziness as well. For most of it we can thank VW’s then-president, Ferdinand Piëch, portrayed on the blog in 2023.

The W12 engine – when nothing was impossible

Today the VW group includes several other brands that could take on the role of bringing a bit of fun to the group’s line-up. It’s just that few of them do, and these don’t bring the margins anymore that they used to. The “Core” group that next to VW includes Skoda and Seat sells the largest number of cars (around 5m last year out of a total of 9m for the whole group) but at only 3%, has the lowest profit margin in the group. When things were going well, Porsche only made up 4% of cars sold in the VW group, but stood for almost 1/3 of the profit with solid, high-teens profit numbers. Today that number has fallen sharply to barely 5%.

In the “Progressive” group of brands with Audi, Bentley and Lamborghini, margins used to be higher as well, although not as high as Porsche, but just as with the Zuffenhausen brand, profitability is in free fall. That may also have something to do with a not very exciting line-up below half a million EUR.

If VW lays off 100,000 people and axes four assembly plants, that would be the largest restructuring in automotive history. It even beats GM’s restructuring during its 2009 bankruptcy, costing 74,000 jobs. VW’s savings plan also includes further actions, closures and divestitures, but it’s difficult getting the hang of it all at this stage. What is clear though, is that none of this will go down easy. German unions have already taken action to delay both layoffs and closures and VW’s state ownership will only complicate things further.

Writing this from the south of France where we’re not far away from a large Renault dealership, it’s interesting to see how much better the Renault group has navigated the difficult market in the last years. VW and Renault aren’t perfectly comparable, as Renault is only a quarter the size of VW and was never a high margin business. Also, there are no flashy brands under Renault ownership, except perhaps for Alpine, but that was never a volume business. That’s however also why the comparison is interesting.

Renault’s latest EV addition. Reminds you of something? Exactly! And it costs less than 20′ EUR.

Renault sells on volume, and taking over Romanian Dacia in 1999 was business-wise a genius move. Dacia is today not only Europe’s cheapest, but also its best selling car brand. Renault’s own cars are also based on high volumes, and with the EV line-up of the retro-inspired and cool electric Twingo, R4 and R5, they’ve understood how to build EV’s that make sense and that people actually want to buy. Last month, they passed the cap of one million EV’s sold.

Strong volumes and a country with a sensible energy policy and thereby lower energy prices have also enabled Renault to improve on profitability, so that its margins are today higher than those of the VW group. To me, that’s the most worrying aspect of all. If a group with small hatches and Europe’s cheapest brand at its core manages to make more money than a group including Audi and Porsche, then something is indeed very wrong.

It will take years for Germany to change course, and it will cost many more jobs than those at VW until we get there. With regards to one of the world’s largest automakers, the question is how long it will take them to turn the ship around, and how realistic it is that they do. If you believe their board, not very, which probably means one of the first actions should be to replace them with a more optimistic – and realistic – bunch.

If VW manages to stay alive, it will be because they re-focus on Europe. That’s the region Renault sells 70% of its cars in. China is over and to a large extent, so is the US. Not just for VW, but for many brands across many sectors. In that sense, globalization is over for now.

Auto legends: the story of Ferdinand Piëch!

On By ChristofferIn Auto Legends, News2 Comments

One of the nice things with writing a blog that enjoys a growing circle of readers, other than boosting your ego, is that the chances increase by the week of actually meeting your readers in the flesh. Of course this has happened before in the circle of close friends, but in the last couple of months I’ve run into people I didn’t know from before, and it’s subsequently become clear that they read this blog. That’s of course great in general, but it’s even more so when they help generate ideas to write about. Because coming up with exciting content every week isn’t always easy, even in the car world!

This week I’ll therefore start a mini series much like the one on classic car races that I write about from time to time. I’ve decided to call this new one Auto Legends, as it will be about the men (and yes, it so happens they are almost exclusively men) who have helped shape and put their mark on the automobile industry. I can almost feel many of you now expecting to see a picture of an old man with big, black sunglasses here below, i.e. Enzo “Il Commendatore” Ferrari. Actually though, to mix it up a bit (and also as there has been a fair bit of “Italinanitâ” on the blog lately), we’ll start in Germany with a man who has a CV that may make even Enzo blush – Ferdinand Piëch.

Grand old man Porsche in the middle, young Piëch to the right

If the slightly strange, Austrian name Piëch doesn’t ring a bell with you, the first thing to note is that Ferdinand, born in 1937, was the grandson of another legendary car man with whom he shared his first name, namely Ferdinand Porsche. It’s therefore no big surprise that he started his career at Porsche, but that’s not where he became most well-known. Rather, that was as chairman of VW that he completely re-modelled in the 1990 and 2000’s, turning it into an automobile giant, and earning himself a reputation as a, let’s say less likeable personality. But let’s take it from the start.

Young Ferdinand Piëch was head of the motor sport division at Porsche in the 60’s. This included the role as head of testing, where his focus was on very light racing cars such as the Porsche 906, which after modifications also became known as the 910. From the post on the Targa Florio earlier this year, you may remember that this lead Porsche to completely dominate that and other races in the late 60’s, by which time Piëch was no more than 30 years old. He was also instrumental in the development of the Porsche 914 that we looked at a few weeks ago, and most other things that came out of Zuffenhausen in the 60’s and early 70’s. Then however, following a feud between different fractions of the Porsche family, he had to leave the company.

Piéch was the brain behind the four-wheel drive Quattro

In 1975 Piëch thus became head of technical development at Audi, notably leading the development of the Audi Quattro. The subsequent success it had lead Piëch first to the position as co-CEO of the company, and then from the late 80’s its CEO. If you think back to the second half of the 80’s, this is of course exactly the period when Audi went from being a very sleepy brand for old people with hats to something far more modern and desirable. Piéch however kept a strong focus on motor racing when at Audi as well, with next to the rally wins of the Audi Quattro, also various wins notably in the German DTM series for touring cars.

Ferdinand’s star continued to rise on the VW sky and in 1993, he became CEO of the VW group, Audi’s mother company. Having proven his capabilities as a car man, this is the period when his business understanding really starts to shine through. 1998 was a big year in this sense, and more than one eyebrow was raised when in the same year, VW acquired Bentley and Lamborghini (the latter through Audi) and also the rights to the Bugatti trademark.

The best Bentley ever – built by an Austrian

The early 00’s then became the period when Piéch aimed for the stars with the whole VW line-up, arguably with a slight lack of understanding of the perceived prestige of some of its brands. The VW Phaeton with a W12 engine thus never became more than a curiosity, but the Audi A8 with the same engine and of course the Bentley Continental saw far more success. Especially the latter was by many considered the best Bentley ever, and Ferdinand certainly took a lot of pride in knowing how to build a British luxury cars better than the Brits. However, one piece was still missing in Ferdinand’s puzzle.

Even if he hadn’t worked actively for the company, Piéch had sat on the board of Porsche, where his career once started, since the early 90’s. Of course he also had family ties to the brand, so it’s no surprise that he felt especially strongly about it. In 1998 however, in one of his razor-sharp statements, he said that for as long as he lived, Porsche would remain independent from VW. Well, that was to change 14 years later when VW acquired Porsche, while Piëch was still very much alive. To Ferdinand, Porsche became the most important brand in the group, and the group he had built had by now also become one of the largest and most profitable car groups in the world.

The Porsche 910, the Bugatti Veyron and the Audi A2 – Piéch was behind them all!

When Piëch passed away in 2019 his legacy was thus utterly impressive, not only in sales numbers, but also in the cars that were developed under his watch (you could also add here the fact that he was the father of no less than 12 children as well…). The W12 Phaeton may not enter the history books, but the Bugatti EB110 certainly will, and without it, we wouldn’t have seen neither the Veyron, nor the Chiron. And without the Bentley Continental, I’m pretty certain that Bentley as a brand would also have belonged to the past. Adding to this the development of Porsche that was on the brink of bankruptcy 30 years ago, what Piëch managed to build is truly fantastic.

So what about the likability part? To start with, I very much doubt there’s a single global company in any sector who has a Mr. Nice Guy as its CEO. That said, Piëch was known for a very authoritarian, if not dictatorial style of management. He had absolutely no time for errors and wouldn’t tolerate mistakes. Maybe the himself legendary Bob Lutz put it best, saying that Piëch although he didn’t agree with his dictatorial style of management, there’s no question that Piëch was a brilliant person and leader. Today’s VW group is the best proof of that!