| Quote, originally posted by psychoart » |
| First of all, Euro was supposed to be higher than US in the first place. That's the reason for establishing the Euro. |
Uhmm, should this be true, it means the EU never intended to make its export goods or services appealing to both US and global markets. Should we believe they are that stupid?The reason the Euro was established was to centralize and equalize all of the individual economies of European Union member nations in order be unified global trading partner. However, the harsh reality is that in the beginning, it served to make strong member economies weaker and weaker ones stronger... all at a price. Germany in particular is just now starting to recover from 4 straight years of 0 growth as Italy etc "get up to speed". The goal for the currency was to maintain a slight under-parity with the dollar in order to sustain profitable EU exports to the US and be in a good position for EU companies to hedge the Euro against other world currencies.
The problem in recent times ("Bush times"), is that the dollar has weakened in the face of a mostly consistent Euro. This is in part to the obscene US deficit, stagnant economy and expensive military boondoggles... something that the EU could not have foreseen to be as bad as it currently is. I'd be blaming president Bush before I'd be blaming anyone else.
The current Euro/Dollar woes are significant for US-based importers and are often neglected by consumers and auto enthusiasts that maintain their blind "market this product to me" mindset. Many small companies dealing in specialty German imports (like delicatessen goods, silverware - crystal etc.) are suffering and many have gone under as a result. VWoA is not immune, and are really lucky to be alive at this point given their massive losses on German product over the last 2 years. This also applies to any of VWAG Konzern products from Europe, so assumptions of ease in importing SEAT models or Polos or whatever... are fraught with financial risks.
I know what you're thinking. "BMW and Mercedes seem to be doing well given the weakness of the dollar, so whats up with VW?" The answer here is that BMW and Mercedes both have assembly plants on US soil. VW does not. The tax breaks and margins earned on the sale of US-made BMW and Mercedes product helps to offset the losses on their German imports. Sure, VW has Puebla and Curitiba that "sort of" is the same, but Latin currency issues related to local inflation means that the margins are smaller with higher risk. That, and the travesty of VWAG (wrongly) assuming the outgoing A4 platform would have staying power and therefore decide there was no need for simultaneous global tooling of A5. Big mistake.
| Quote, originally posted by psychoart » |
| Secondly, if American behaviors change all the time like you've said (i.e. unpredictable), I guess Toyota and Honda don't know what they are doing. |
What's your point? Is it some awkward manipulation of my context? Indeed, Toyota and Honda have unlocked the secret to successfully pander to the whims of American consumerism. They apparently have no business culture, overall culture or principles against doing so, as it has made them extremely rich and powerful as car companies. German marques and VW in particular are mired in what many analysts here believe to be a business culture that resists change or pandering based on draconian principles that result in under-performance related to others. Within this, a German model is never to disappear or fail. What analysts and consumers don't realize is that part of VW's brand identity in the US/CDN is that "Volkswagens are not for everyone" and that they have no intent to be as big as Toyota or Honda here .... really a slap in the face of conventional capitalism where winners are everything, but ultimately a typically Teutonic German way to think. Don't forget, we're talking about a global player that traditionally has neglected and angered its worldwide stockholders, regardless of individual market success or failure. Why should the US market be special to them when they have a strong captive home market, but behind the scenes struggle with an outdated business model nonetheless. In this light, the whole "moonraker" project really shows hard VW is trying to come to grips with cultural and business model paradigms. While we should give them credit, it may very well be a matter of "be careful what you ask for" 
I believe that VWAG does indeed "understand" the US consumer by simply witnessing the market activity here and contracting countless market studies over the years. But unlike the Asians and Domestics that subscribe to the accepted chant in the US that "winning is everything", VW's intent is to exist, as it has been, as a unique alternative. With a cult status born out the irreverent nature of its products that began with the original Beetle, this strategy has a major flaw in the pure capitalist sense, and that is low margins based on low volumes relative to other US players. This is a tough, long-term business model to justify (with VWAG having to subsidize much of VWoA's operations) and it's time that both find a way to grow mainstream acceptance without alienating exiting customers. The new Jetta is an example of just such an attempt, and we've seen the volatile reactions here as evidence. What is not known to many is that the new Jetta is for the most part a product of an in-depth collaboration between VWAG and JD Power, specifically tailored for pandering to the desires of US consumers. As such, many "typical" VW detail design features have been altered (like the standard driver's power backrest - no knob, improved safety belt height adjustment action, separate cruise control knob as on Audi - because no complaints on Audi... and many more). Point is, this is a lot tougher nut to crack than many imagine, given the nature of the US consumer. Remember that you "cannot please all the people all the time" and one need look no further to the reams of enthusiast rhetoric in vortex forums as proof.
In the end, before anyone dreams about new product or accuses VWAG of intentionally depriving US consumers of all the goodies found in other markets, there are many critical things that affect and even restrict the manner in which VWAG performs its business here... and that these things often do not affect domestic competitors in particular, and are not entirely relative to Asian competitors. Very much a matter of "what comes first, chicken or egg", I'll instead suggest VWAG take a closer look at repairing/optimizing its current VWoA import only business model before it considers any new product in excess of the current long-term commitments for 2007 (A-SUV, Minivan etc.).
So, where does that leave us? A pickup won't happen as long as the US 25% "Chicken tax" tariff is in effect. Even if built here, the market is saturated so volumes would be low. Low volumes mean no margin. Only the Asians have the market cap. to cover failure here. I believe that those that subscribe to "winning is everything" and that a German automaker should fill all possible niches and holes between niches as created by the Toyotas and GMs of the world will be disappointed. The stubbornness of the German business culture is at odds with that. Ultimately and arguably, in order for VW to maintain it's current brand identity and at the same time show better market performance, it must build some kind of plant here for some kind of product that will sell with enough volume to offset any Euro/Dollar import losses, ....mmmm, just like BMW and Mercedes . The Polo would be a good choice to build here, but market studies, market saturation and past history (VW Fox) have shown VW to have wet feet in this regard, can't say I blame them. Regardless, only when VW has a plant on US soil can any product dreams be argued as valid... so long as it does not make them an appliance making monster like Toyota. So, who can answer this: How can VW find a way to build small volumes of unique VW product and be profitable at the same time?. It all comes down to developing a successful US business model, that in this case is a unique solution for a unique company as defined above.
I personally would like the VW brand to remain an alternative, not be for everyone, and not prostitute itself in the face of a competitor's size or brand image. If the original air-cooled Beetle's heritage is used in any context, it should be to not make cookie-cutter clones of top performers in a segment or niche. Winning isn't everything.
Cheers,
Juergen
Where can I find more info? Haven't heard of this one yet, except for the old Audi motors.
