We Learn Nothing from History

By Jon Miller | Post Date: February 2, 2010 1:43 PM | Comments: 0

Even as Toyota mops up the mess from their sales volume-driven expansion-related quality problems, challenger Volkswagen AG "...unveiled an ambitious plan to boost annual sales to eight million vehicles in the midterm and to exceed 10 million by 2018." according to an article in today's Wall Street Journal, VW Aims for Toyota's Sales Crown. So far investors are modestly rewarding the Volkswagen share price, which in the lifespan of a fruit fly is all that really matters anyway.

VW is doing well, making beautiful cars and returning good earnings. According to my friends in the know, they run a respectable facsimile of the Toyota Production System. They have also weathered the economic storm relatively well:

The German auto maker has steered better through last year's industry gloom than its rivals mainly because of a large presence in China and a strong foothold in Brazil. Additionally, sales on its home turf were fostered by state-backed scrapping incentives to trade in old gas guzzlers last year.

And VW chief executives see brighter days ahead:

VW said it plans to achieve "further significant" cost cuts in coming years, partly through creating more synergies between different model lines and greater flexibility.

Creating more synergies and greater flexibility usually means "we have redundant capacity" so the plans to expand capacity are a bit puzzling.

The U.S. has proved tougher and VW is responding by pumping $125 million into two new dealerships in New York City to raise the profiles of VW and Audi. Additionally, Volkswagen will invest $1 billion in a new plant in Chattanooga, Tenn., for the production of a midsize sedan in 2011, with initial capacity for 150,000 cars annually. It will invest as much as $1 billion in the plant and create about 2,000 jobs. Volkswagen closed its last U.S. plant in Westmoreland, Pa., in 1988 because of underutilization amid sluggish sales.

Toyota has a few idle factories, why not buy up one of those?

A final word to the wise: betting against Toyota after they have been knocked down has not historically been a good idea. Each time they have come roaring back. What makes VW think this time will be different?

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