2005 Frankfurt Auto Show, Part VII

September 14, 2005

2005 Frankfurt Auto Show Index by TCC Team (9/5/2005)



VW’s Bernhard Lays Down Ultimatum


Wolfgang Bernhard 2005

Wolfgang Bernhard 2005

Even as Volkswagen wrapped up a major product offensive with this week’s debut of its Eos hardtop/convertible, the brand’s new boss, Wolfgang Bernhard, told TheCarConnection.com that the future of the German automaker is anything but certain. So is the role its flagship assembly operations, in Wolfsburg, Germany will play in the future. Workers have less than two weeks left to grant concessions that would shave a thousand dollars more off the cost of assembling a new compact sport-utility vehicle. If they miss the target, work will be transferred to a VW plant in Portugal, said the youthful but hard-driven executive.


Bernhard’s highly visible role at this week’s press preview of the Frankfurt Motor Show marked his official coming out since agreeing to take on the difficult challenge of reviving Volkswagen AG’s flagship brand. More than a few of the ideas he brought with him, Bernhard acknowledged during an interview, were developed during his tenure as chief operating officer at Chrysler. He left DaimlerChrysler during a dispute with board members last year and was shortly after recruited by VW Chairman Bernd Pischetsrieder.


“It is clear,” said Bernhard, that leaders of the normally militant German labor union, IG Metall “understand…the need for change. We have our back against the wall. We can’t give anything anymore. The only thing we can give is the future of Volkswagen,” if workers help make the company more competitive. The challenge, he lamented, is getting the rank-and-file to understand the urgency and go along.


Working out of the spotlight, Bernhard has been implementing a number of changes designed to reduce costs on what observers described as an equally bloated white collar operation. To speed up the development of the sport compact, Bernhard brought nearly 300 key planners, engineers and managers together for a week-long summit session, dividing them up into 30 teams. “There were no excuses. Everyone was there. We put them in a big room and locked them up,” he explained, and told them no to do anything but work on this vehicle.”


Each night, Bernhard was handed a “report card” outlining the day’s efforts and calculating the projected savings each team had generated. “By the time we got 2000 euros, everybody cheered,” he recalled, adding that this saved the project, but it will still take union concessions to bring it home to Wolfsburg . Bernhard’s boss has been equally tough, Pischetsrieder telling the union that it can no longer justify the no-cut contract and shortened work week negotiated under former CEO Ferdinand Piech.


While problems at home are getting much of the attention, VW AG has a variety of other issues to address, including the slump in its U.S. operations, and its continuing decline in China, where it was long the industry’s leading brand. But without a turnaround in Germany , Bernhard stressed that the automaker’s future is, at best, uncertain.






VW Taking a Breather


2007 Volkswagen Eos

2007 Volkswagen Eos

It has been a busy year for Volkswagen, with the launch of an assortment of new products, such as the Golf and the new Eos, an unusual hardtop/convertible. In a fast-changing market, where the competition is rolling out more product than ever, VW needs to expand its portfolio, not only updating its current vehicles but adding anywhere from five to ten models targeting new segments by 2010, said Wolfgang Bernhard, head of the flagship VW division. “If you don’t play offense, you’re not going to succeed,” he said during an interview.


But don’t expect them to reach market in the near future. In a process that Bernhard admitted is decidedly out-of-date, VW has tended to cluster product launches together, then gone for several years with little new to show the public. In the future, he emphasized, the German automaker will work on staggering the roll-out cadence, even if it means delaying the replacement of existing products.


The current run-up in fuel prices has VW taking a close look at its product plans, Bernhard said, noting there could be more diesels and even some hybrids added to the lineup.


He also confirmed talks with his former employer, Chrysler, which could result in the U.S. maker building a version of its popular minivans for Volkswagen, an alternative to VW’s own, now-cancelled project. If the negotiations succeed, said Bernhard, “We’re not going to just replace the Chrysler badge. It will have to be a different animal.” The move would significantly reduce VW’s potential investment, while helping Chrysler improve the utilization of its minivan production capacity, he added. Though a deal is still not finalized, Bernhard suggested he would like to see a VW minivan on the market, “in two years.”


Meanwhile, the German maker is studying how to follow up on its current luxury vehicle, the Phaeton. Sales have been minimal, at most, but Bernhard is convinced the model serves as a brand halo, and should be kept alive. “Our customers say it supports the brand, but it’s a hell of a job selling those vehicles.”



Chrysler’s New Team Staying the Course


“Nothing’s changed” as a result of the recent management shake-up at Chrysler Corp., insisted the automaker’s new number two executive, Eric Ridenour. “It doesn’t mean, by any stretch of the imagination, that we’re on an easy course,” the new Chief Operating Officer rushed to add. But in a Frankfurt interview, Ridenour said the company’s top priorities remain product, quality, and cost. On the quality front, Ridenour said, “We intend to be among the leaders in 2007.” Meanwhile, the company has been taking a variety of steps to drive down material costs and to bring down fixed costs. Teaming up with suppliers on a new Jeep plant will bring its investment down to a relatively low $300 million, and the possibility of supplying a line of minivans to Volkswagen would better utilize existing capacity. As for product, “creativity is one of our strengths,” the COO asserted. Chrysler is readying an assortment of new products, including a number of entries into new segments. At this year’s motor show, it unveiled a pair of Jeeps, one a fairly conventional off-roader, another aimed at buyers unlikely to leave the highway but who still want SUV styling and all-wheel drive.



GM Studying European Competitiveness


“We know how to make our workforce more competitive,” said General Motors Europe Chairman Fritz Henderson, during an interview at the Frankfurt Motor Show. What’s not clear is if workers will go along with demands that could result in more work for no more pay. The automaker said unions are not the only reason why European factories are increasingly uncompetitive, pointing to the Continent’s high taxes, used largely to fund social welfare benefits. With a car like the compact Corsa, GME President Carl-Peter Forster estimated there might be a 400-euro labor cost penalty building in a country like Germany , though the central location also has some logistical cost advantages, he added. It’s not only manufacturing that’s threatened, Forster pointed out, noting that a growing share of the company’s 20,000 German employees work out of its design and engineering facilities, rather than on an assembly line.



Henderson Says GM Europe’s Work Not Done


Fritz Henderson

Fritz Henderson

“Never declare victory too soon,” said Fritz Henderson, the head of General Motors’ big European subsidiary, during a small group interview on Wednesday. But with GME having really posted a much-needed quarterly profit, Henderson couldn’t resist at least a little chest-pounding, suggesting that, “We’re moving in the right direction.” The current, third quarter will be a tough one, echoed GM-Europe President Carl-Peter Forster. But it’s always the year’s low point because mass vacations in August nearly grind the European new car market to a halt. So far this year, GME’s overall market share has been relatively flat – which is actually an improvement in light of recent declines. The flagship Opel/Vauxhall brands have suffered a modest, 1.2-percent drop in sales, but that’s been offset by a significant, 26.7-percent increase posted by GME’s expanding Chevrolet operations. GM Europe rolled out a wide range of vehicles at this year’s Frankfurt Motor Show, and officials said they’re encouraged that could help them build momentum in 2006.



Saturn Could Go Euro


2006 Saturn Sky

2006 Saturn Sky

Originally envisioned as a Japan-fighter, the Saturn brand has never really achieved its early forecasts. That has much to do with a dearth of products, officials admit. That’s about to change. In the next several years, Saturn will double the number of segments it competes in, with products like the new Sky roadster. But globetrotting motorists might notice a subtle shift in the design theme of the American brand. Going forward, much of the Saturn product portfolio will be developed by General Motors’ European design and engineering operations. The replacement for the Vue crossover vehicle, for example, will be virtually identical to the new Opel Antara, shown in concept form at the 2005 Frankfurt Motor Show. In years past, GM Europe had explored the idea of exporting products to the U.S. , as it had some decades back. But off-kilter exchange rates make that an unlikely source for Saturn production. On the other hand, the weak dollar is enhancing the appeal of U.S.-made products, said GME Chairman Fritz Henderson, so, “We could bring a Saturn here to sell as an Opel, the Sky roadster as an example.” Henderson emphasized that nothing is currently planned, but General Motors insiders confirmed to TheCarConnection that the concept is being actively studied.



Ford Depends on Design, Says Padilla


“We intend to be far more aggressive and far more appealing,” said Jim Padilla, Ford Motor Co. Chief Operating Officer, during an appearance in Frankfurt Wednesday. “A major tenet of what we intend to do in the business is a design-led recovery.” That’s a significant change in direction for the troubled number-two automaker, numerous company officials acknowledged during the Frankfurt Motor Show. In recent years, Ford has tended to play it “safe,” with admittedly boring products, such as its big Five Hundred sedan. Padilla spoke alongside Mark Fields, who was named last week as the automaker’s President of the Americas , its unprofitable home unit. “We made the changes for several reasons,” Padilla explained. “We’ve been working for awhile to have a stronger strategic focus. Frankly, it has been unsatisfactory. We will work to pull together a cohesive business plan. Greg Smith is the chief strategy officer and Mark Fields is a good operations guy. The people we’re moving into place are known commodities.” Separately, the two executives were asked about Ford’s struggling Premier Automotive Group, which Fields ran before taking on his new job. One question many observers are wondering is what will happen to the slow-selling Jaguar lineup, particularly its entry-luxury X-Type. “When we put together the original Jaguar plan,” said Padilla, “we did not own Volvo or Land Rover. What we need to do with Jaguar (going forward) does not need to be as broad or comprehensive. Now we can be a niche player with beautiful and fast cars.”

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