Volkswagen AG has increased its market-leading share in Europe this year, but all is not good news for the group. Profits have slipped. And some dealers who complain about product overlap have criticized VW's strategy of sharing platforms across brands and model ranges.
Ferdinand Piech, now finishing his eighth year as CEO, is undaunted. He is still chasing new-product opportunities, ranging from a small VW car for emerging markets to super-luxury models. He is also eager to move into heavy trucks with an acquisition.
Piech was interviewed by Automotive News Europe editors and reporters at the Frankfurt auto show in September. Edited excerpts follow.
What is the most important segment today for the auto industry - and for Volkswagen?
The small-car segment for Europe - Lupo and Polo. In the USA: Golf, Jetta and Passat.
Are you worried that taking the VW brand further upmarket will put it in competition with Audi?
The fisherman can have one lure or more than one. You will catch more fish with two lures than one.
Are you satisfied with Audi's performance in United States?
Audi was up 40 percent through September, and as long as the sales increase continues in double-digits, that is enough.
You are intending to build a small car in China priced between $5,300 and $6,900?
We are planning to build a small car, and it could be in China, and in that price range. It will be a Volkswagen car.
How will you be able to meet safety demands and other requirements with that price target?
We need a cheaper production site. The car could be made in eastern Europe, as well as China.
Which VW platform would you use for this car?
We think there is enough volume around the world for a new platform.
What volume do you expect for this car worldwide? We've heard 1 million units annually.
Yes, that is right.
So this will be VW's car for developing markets?
Not only for developing markets. It will also be sold in Europe. It won't be sold in the USA.
You've been quoted as having some interest in American-style pickups.
I have a family of five, and we like carrying five mountain bikes in the rear and traveling in a king-size cabin. I test these kinds of cars. We look at what we could do better in the future. We think the market will have a use for vehicles that can carry motorcycles and bicycles and five or six people. Wait until Detroit (the auto show in January) to see what we think.
How do you shift from a European to an American mentality? How do you understand how Americans feel about pickups or sport-utilities?
We have all of them in our fleet. I own two privately - vehicles that are very successful in the U.S.A. - the Grand Cherokee and Ford Navigator. If VW finds anything that is good, we buy it, take it to Europe, give it to our engineers and say, 'This is good; make it better.'
What do you do when a focus group has a different opinion than your own?
For the past 33 years, I have found no clinic can replace your instincts. I don't believe in clinics. The aluminum car didn't do well in clinics, but it's a success. You can make a market with a new product.
VW's platform strategy has been successful. But it is there any danger of brand confusion?
Some dealers have complained about this.
Do you take those comments seriously?
We have talked too much about our platforms. Others don't talk. There have been some misunderstandings. For example, today's Polo isn't on a new global platform. The Seat Ibiza, Seat Cordoba, Skoda Felicia and the VW Polo are four different platforms. What we are looking for are high-volume platforms that require little change in manufacturing, so if the market for Golf goes down and Polo goes up, we can react immediately. Our manufacturing facilities for front-axle and rear-axle cars are built so they can go through different platforms that are identical in major design criteria.
Same for engines. If diesel demand goes up and gasoline demand goes down, we also have that flexibility.
What are your plans for growing VW's heavy-truck business? Scania and Volvo are now out of reach.
We are talking to others. VW needs heavy trucks. The key isn't over 40 tons. But within the next five years we will need to make trucks from 18 to 20 tons; otherwise we will lose business. There is good money to be made in this segment around the world. Most of the business comes from spare parts and service.
What are prospects for the truck market?
Light-to-medium trucks will see an increase in business. Heavy trucks aren't allowed in some European cities. We don't see a big growth in heavy trucks. But we see a big change in light- and medium-sized trucks. At the moment we only make trucks up to 2.5 tons.
Is it more effective to buy another company or to do it yourself?
If it's a good company, it's better to buy. If it's a bad company, it's better to do it yourself. Our choice would be a good company, but Scania was too expensive. At the moment we're going our own way.
Will you negotiate with BMW to retain control of the Rolls-Royce brand in 2003?
In January 2003 we give up control to BMW. But it is an open issue. The issue will be decided before the end of this year - whether they want it.
Will you continue to build Rolls-Royce cars in the meantime?
It wouldn't be a wise idea to stop production of the Silver Seraph. Right now, we have an interest in Rolls-Royce surviving. If production is stopped on Jan. 1, 2002, then BMW cannot start making Rolls-Royces until 2003.
Every modification we made to the new Bentley against rattling and noise we also carried out for Rolls-Royce. Only the engines are different, and our feeling is that customers want different engines. We offer the BMW turbo on the Rolls-Royce in parallel with the Bentley engine.
If BMW wants you to continue making cars for Rolls-Royce, can you do this?
We can - we would make money with the car.
What about Bugatti - will it have a luxury sedan, a sports car, or both?
It basically depends on BMW as to what comes first. Our offer to BMW is that we can do whatever they want - but to take all the tooling to another site makes no sense. If they want to end the car, then maybe we'll make a Bugatti sedan. If BMW wants to continue the Silver Seraph, Bugatti will have something like the sports car you saw in our display at the Frankfurt show.
Normally, Rolls-Royce products run for 18 years. Even if they cut that time in half, that's nine years. But in 2002, that would be five years - only half the lifetime for the Silver Seraph - and (if production is halted then) customers would not like it too much.
Will you manufacture in the United States again?
We are making cars in Puebla, Mexico. We think we produce the same quality in Mexico as Germany. It is one of our best factories. Why would we give up lower wages by going to another place? A Beetle produced in the U.S.A. would be too expensive to export to Europe. At the moment we are well positioned.
Do you have enough brands?
We have enough. I wanted to have two luxury brands, and we got four (Rolls-Royce, Bentley, Lamborghini and Bugatti). We have mass-production brands - VW, Audi, Seat and Skoda - and we have luxury brands. But we handle them similarly. The luxury brands compete against each other, like fighting for horsepower. And the four mass-production brands compete - and only one can win. Of course, I prefer the winners.