VW and tough lessons learned

Once such illustration is the latest in an excruciating series of ‘story telling’ videos on the web where current CEO Herbert Diess ‘Speaks’ to various figures. In this one Diess is driven around Wolfsburg by 95-year-old Carl Hahn in a battery-electric VW ID.3. Diess coyly inveigles Hahn to agree that VW also suffered problems in America when he was in charge, but the old fella is having none of it; it’s hilarious.

‘The USA, it was very easy,’ dismisses Hahn. ‘In my days we were very popular in the States thanks to our advertising, the best advertising of the 20th century… We were so popular in America that the Beetle was known to families as the friend who sleeps in the garage.’

Diess can’t get out of the car fast enough…

Yet there are real issues out there that VW needs to face up to, and not just its economic vulnerability. But perhaps people increasingly regard their modern-day Golfs less as a friend, more as an enemy sleeping in the garage, especially a Golf Mk8 or similar Skoda or Seat built since 2019, which have suffered a series of software glitches, as well as a touchscreen design that is both profoundly baffling, and dangerously distracting. On one Golf 8 model derivative launch last year, every single journalist had to climb out of the car to ask simply how to switch the air conditioning on.

There was scant attention paid to these issues potentially affecting the five-million VW Group cars produced last year, when Klaus Zellmer, vice president for sales and marketing and Thomas Ulbrich, vice president of research and development, recently unveiled their ambitious plans for yet more software development.

‘No one would claim that the software in the Golf 8, or ID.3 was perfect,’ admitted Zellmer, ‘but it has a lot of possibilities for the future.’

‘Not everything worked perfectly from day one,’ said Ulbrich, ‘[which] led to frustration with customers.’

Actually, the software still isn’t working, Thomas, and customers are tearing their hair out…

What he and Zellmer were doing, of course, was outlining VW’s latest futurology whizzbangers including Trinity, a new saloon project destined for a 2026 launch, which will update itself every 12 weeks, be software-prepared for hire, subscription-rental, sharing, or outright ownership acquisition alternatives. It will even be equipped with a range of pre-fitted extras, which you’ll only be able to rent or buy by paying even more – heated seats on a cold day? Certainly madam, that’ll be €35 a week, if you could just tap in your PIN on the touchscreen.

Anyone struggling with a Golf 8 dashboard flickering between mph and kph, or a non-functioning air-con, must have thought this heavily staged folderol showed a tin ear of Cornish-mine proportions. And please don’t get me started on new capitalism’s conceit that not owning anything is ‘awesomely’ liberating for consumers. Whether applied to houses, cars, consumer durables, your love life, your job, dog, or anything else, treat these new messiahs with the weightiest suspicion. Zellmer reckoned VW’s software services would be capable of gouging ‘three-digit millions [of Euros]’ out of its customers in future. Interestingly, neither he nor Ulbrich opened up on the amount of valuable data mining Trinity may be doing to you and selling on; less a friend in the garage, more like a burglar…

As one former senior executive put it to me: ‘the trouble with VW under Diess is that they develop everything for German cities and don’t consider how that’s going to go down in the rest of the world.’

Of course, in Hahn’s day it was all so simple, or was it? The over-long and ham-fisted search for a Beetle replacement nearly bankrupted the company. Eventually Giorgetto Giugiaro’s Golf design (which he thought the finest car he’d ever done) chimed just the right note with a market wanting unpretentious and practical German engineered cars. When the issue of lead in fuel became a hot topic, VW acted as an honest broker with the press and public to help pioneer the mass use of exhaust catalysts and lead-free fuel. And, in 1993, Ferdinand Piëch, grandson of Ferdinand Porsche, replaced Hahn in the top job just after the company had recorded a loss of $1.1 billion, its biggest ever.

An engineer of extraordinary perspicacity, but brusque and egocentric, Piëch was credited with turning Audi into a world-class premium car maker and he wasted no time in stamping his personality at VW and repairing the finances. Lamborghini and Bugatti were added to the portfolio and after a battle with BMW, Bentley as well, though he never succeeded in getting his hands on Alfa Romeo. VW was reorganised into a ladder structure of Seat, Skoda, VW and Audi with astonishing brand clarity similar to that of Alfred P Sloan in his time at General Motors.

Yet it wasn’t all plain sailing. As well as the spending spree on obscure luxury brands, the chief executive’s braggadocio was seen at the big motor shows, where VW’s eve-of-show spectaculars cost upwards of £10 million, fed and watered thousands of journalists and commanded the news coverage for days. VW even reinstated the Fiat boat, an extraordinary and exorbitant one-night-only nightclub at the annual Geneva motor show.

Did they fly too high? Probably. There was Porsche’s manipulative attempt to takeover Volkswagen by stealth, which resulted one day in October 2008 in VW overtaking Exxon Mobil as the world’s largest company with over $370 billion in market capitalisation, with Porsche boasting it has gained control of 74 per cent of the German giant’s voting shares. The fall out lost Porsche chief executive Wendelin Wiedeking his job, almost bankrupted Porsche, left investment funds that piled into VW stock facing major losses and damaged Piëch’s reputation even though he’d retired in 2002 to become the chairman of VW’s supervisory board with his place-man ex-Audi boss, Martin Winterkorn taking the top job.

Oh, and then there was the diesel-emissions cheating scandal, which is still to be fully explained, with board members still facing sanctions in the courts, company officers still in jail and class actions lining up at the gate for their share of pie.

It’s beyond the scope of this article to go through Dieselgate, but it’s worth noting that up to that point VW management had kept an acute connection with its customers. No one can deny that the 2010 Car of the Year Golf Mk7 was just about the most consummate motor car ever made. Its author Ulrich Hackenberg confessed to me that it was ‘the hardest job I have ever done’ and we used to say there were few motoring questions that didn’t have Golf as the answer.

Then there were those amazing management driving days, where VW board members and senior managers met a couple of times a year at venues all over the world to drive VW products including prototypes and their rivals, and then sat down to supper with a load more company managers and sometimes journalists. To minimise down time, Piëch purchased an Airbus jet liner to get his managers out and back quickly. It was fun, a bit scary and hard work, but these exercises provided an effective communications channel between top management and, well, just about anyone.

It was on just such a drive Piëch pressed the horn of the Bentley Continental GT prototype just prior to its launch and pronounced it the ‘squeak of a mouse’ – it was changed. There are legendary stories of VW’s senior management standing in the middle of Nowheresville, while Piëch browbeat the upholstery guy into taking a few pfennigs out of the roof lining and the powertrain head phoned Germany to get his engineers to promise a bit more economy from a new model.

Was it run on fear? Of course it was, but the managers did listen. Winterkorn wasn’t the easiest of men to get on with, but I’ve spoken to him at one of these events and afterwards was told that my and another journalists’ entreaties to build the XL1 super-economy supercar were mentioned at the board meeting when that remarkable machine was greenlighted. I’ve also been told of other messages that found their way to the top man at these meetings.

‘I pointed out we were losing out to UK rivals because our opening prices were too high and was directed to speak to Winterkorn. I made my argument in a logical way and he listened, and the next car to England came in at a lower price,’ said one retired executive. ‘When I asked if that was a result of my conversation with Winterkorn, I was told ‘of course, of course’.’

Yet nowadays Diess, an ex-BMW exec, cuts a smaller figure than his predecessors. Seemingly isolated, his only contact with the outside world is though his oleaginous lieutenants – a hermit in the garage. He’s split the company in half, 50 per cent its new electric adventure which starts with the ID.3 and the rest building combustion and partly-electrified cars of the type we’re all used to. It’s expensive and risky, because reliance on outsiders to write the software means the company requires systems engineering to bring soft and hardware together. And that’s a discipline that Volkswagen hasn’t traditionally needed as all the engineers instinctively knew how to do their jobs in relationship to everyone else in order to create great cars. Moreover, failures are easy to blame on ‘the software’ because it wasn’t invented here.

Management culture, which had been changing under Matthias Müller who took over at the top after Martin Winterkorn left in September 2015 under something of a cloud, is taking a disturbing turn back to the old days; fear is once again stalking the long corridors at Wolfsburg these days.

And VW executives answer any legitimate questions about any of these issues by sticking their fingers in their ears and chanting ‘la la la’.

I don’t have any major insights here, other than observations. But companies that distance themselves from outsiders as VW is doing, that try to control their environments in the face of the bleedin’ obvious, that have such stifling internal communications with bosses, and that think grumpy tweets are a good substitute for open communication tend to make bad decisions; just look what happened to the recently defeated 45th President of the United States.

That’s not to say Dieselgate could happen again, just that the lack of scrutiny means we wouldn’t actually know if it was and, as we all know, history has a habit of repeating itself…