Over the years, while under the stewardship of Ferdinand Piech, VW acquired a number of automotive assets that have nothing to do with its core business. It bought Lamborghini, Bugatti and Ducati. It added Scania and MAN trucks to its corporate portfolio. Virtually all of them lose money or barely break even. What’s worse, they distract upper management from its central business, which is selling automobiles.
“It’s all pretty unwieldy,” one former senior executive at Volkswagen of America told Forbes recently. How did Volkswagen let itself get into this mess? Most people point the finger directly at Piech and his autocratic management style. “These are vanity exercises that were put in place by Piech because he wanted to cover the same categories as Mercedes and BMW. They aren’t businesses that are core to the company.”
Some are even harsher in their criticism. Dennis Keene, a Los Angeles-based brand consultant to Fortune 500 companies told Forbes, “It has been the strategy of a megalomaniac, not a brand or business strategist.” Before he was ousted by Martin Winterkorn in a boardroom coup d’etat last spring, Piech was publicly trying to persuade Fiat chairman Sergio Marcchione to sell him the famed Alfa Romeo brand.
Now that Volkswagen is looking at billions in fines and spending billions more fixing its diesel powered cars, many industry analysts are advising new Volkswagen CEO Matthias Mueller to follow the example of Alan Mullaly, who took over the reins at Ford Motor Company in 2006. Ford had engaged in a bit of corporate megalomania of its own, acquiring such iconic car companies as Jaguar, Land Rover, Aston Martin, and Volvo. Mullaly believed those trinkets on the corporate charm bracelet were distracting Ford management from its core business. He divested all of them from Ford’s portfolio and set about enhancing the Ford brand.
Others advise selling off SEAT and just using the SKODA brand to satisfy demand for cars at the bottom of the market. Even the truck businesses should go says Victor Doolan, board member of Sonic Automotive and former chief of both BMW North America and Volvo Cars North America. “There is virtually no engineering, manufacturing or procurement synergies or efficiencies between the car business and the heavy truck business, and they don’t make much sense for a company in the car business,” he says.
The bottom line is that many people familiar with the car business think Volkswagen needs to separate the wheat from the chaff. Doing so would not only make it more competitive, it would send a strong signal to shareholders and the financial markets that VW is serious about pulling itself out of its nosedive. The advice seems to make perfect sense for the troubled automaker.