2010 Year in Review: Volkswagen

Highlights of the year’s major events affecting the Volkswagen Group:

• The auto maker begins the year forecasting it will double U.S. sales to 400,000-450,000 vehicles in 2012-2013, despite the market downturn that is expected to limit industry demand to less than 12 million units in 2010. If it were to hit its 2013 mark, VW would be more than halfway to its 2018 goal of 800,000-unit annual sales in the U.S.

• Focused more on diesels than battery power in recent years, the auto maker signals it is serious about hybrids and electric vehicles at the North American International Auto Show, exhibiting a gasoline-electric concept version of its new-generation Jetta sedan that would be released in the fall and a pure-EV sports car concept for Audi called the e-tron.

Audi Chairman Rupert Stadler says he wants to make e-tron badging synonymous with electric power, similar to the way quattro is Audi’s all-wheel-drive brand.

• Stephan Schaller, CEO for the light-commercial-vehicles operation, issues a warning in January, predicting 2010 will be “another challenging year.”

In addition to market hurdles, the group is faced with melding together with the Scania heavy-truck operations and Germany’s MAN commercial-vehicle manufacturer, 30% owned by VW.

Schaller would be replaced just weeks later, by Wolfgang Schreiber, commercial vehicle business development head. In July, former manufacturing head Jochem Heizmann is named to oversee the critical alliance between MAN and Scania.

• In February, the SEAT subsidiary in Spain wins a showdown with its labor unions, which agree to job cuts, ending a 2-day strike at a plant in Martorell.

In May, VW vows to add new models into the mix at SEAT and boost plant utilization, running at just 60% of its 500,000-unit annual capacity.

• VW turns the clock back on unionism and shop-floor practices in Germany, signing a deal with IG Metall that calls for raises for hourly workers to hinge on meeting individual performance goals.

“Competitiveness is a prerequisite for secure jobs,” declares Management Board Member Horst Neumann.

• A U.S. lawsuit filed in February contending the acquisition of Porsche amounted to securities fraud is dismissed by Porsche CEO Michael Macht. “It is probably not possible to drag us before a U.S. court,” he says.

Later in the year, Macht is pulled out of the CEO’s office replaced by Matthias Mueller, formerly VW’s top product planner. Macht moves over to head manufacturing for the VW Group.

• In March, a new company, Volkswagen R, is spun from the auto maker’s performance-vehicle operations.

Similar in concept to Audi’s 25-year-old Quattro offshoot, Volkswagen R is staffed by 350 people and charged with developing more models along the lines of the existing 227-hp Golf R and 261-hp Scirrocco R.

• As the first quarter winds down, plans are announced to put up to 65 million new preferred shares on the market to finance the acquisition of Porsche and bolster credit ratings.

The transaction is forecast to draw some E4 billion ($5.5 billion) from investors. Qatar quickly signals it may increase its 17% stake in the auto maker by purchasing some of the new shares.

• China’s booming market prompts plans for two more assembly plants there. The E1.6 billion ($2.2 billion) investment is aimed at expanding sales in the market to 2 million units annually.

VW uses Auto China 2010 to provide a sneak peek at its ambitions, displaying its E-Lavida Concept car, an all-electric model based on the Golf MKIV platform. The car is green-lighted for production, but no launch date is set.

• Volkswagen Slovakia phases out Skoda Octavia production at its Bratislava plant. Nearly 47,000 are built between March 2008 and May 2010, with production never reaching the planned 60,000 to 70,000 units annually.

The move clears the way for output of the New Small Family minicar range, shown in concept form as the Up!, beginning in 2011.

• Looking to bolster its design capability – and, perhaps, help out a longtime ally – VW takes a 90.1% stake in Italdesign Giugiaro. The formerly independent design firm has a long history of working with the German auto maker, including designing the first Golf.

• In late May, Karl-Thomas Neumann is named next in line to head operations in China, succeeding Winfried Vahland, assigned to the top job at Skoda after five years at the helm. The two would move to their new posts in September.

• A new Polo sedan for the Russian market is unveiled at the Moscow auto show.

Equipped with 105-hp 1.6L engine, it is to start at RR399,000 ($12,842) when it hits the market in September. Production already is under way at the Kaluga, Russia, plant when the car takes its public bow in June.

Later, word comes Russia’s GAZ may be contracted to build vehicles at its plant in Nizhny Novgorod following a meeting between Chairman Martin Winterkorn and Russian Prime Minister Vladimir Putin in Moscow.

The auto maker says it needs more capacity if it is to hit its 360,000-unit sales target for Russia in 2017-2018.

• On again, off again talks over potential collaboration with Proton end in June, this time seemingly for good.

The Malaysian auto maker says Volkswagen would have been “an interesting partner,” but negotiations broke down because the German auto maker had other priorities.

Later in the year, VW seals a deal with Malaysia’s DRB-Hicom to assemble unspecified vehicles from complete-knocked-down kits.

• In late June, reports leak Zhejiang Geely has convinced Volkswagen of America head Stefan Jacoby to take over as CEO of its newly purchased Volvo Car subsidiary.

Jacoby’s success in expanding VWA’s footprint in America and his previous experience with VW in China seemingly makes him a good fit to fill the vacant top job at the Swedish car maker.

Jonathan Browning, a former managing director of Jaguar Cars, is named to replace Jacoby at VWA in August.

• By midyear, Audi is predicting a return to U.S. profitability after several years of losses.

“Audi will earn money this year in the U.S.A., and we will see to it that this remains the case,” promises sales chief Peter Schwarzenbauer.

Things also were going well in China, where the executive predicts a record 200,000-unit sales for Audi in 2010.

• Floods force Skoda to shut down all three Czech Republic plants for several days in August, after damage to local supplier operations restrict the flow of needed parts.

• A strike is avoided in Mexico when a new contract is reached in mid-August with local unions calling for a 6.1% wage hike. Workers had been seeking a 7.6% increase.

• Putting some hurt on a key competitor, Adam Opel Managing Director Hans Demant is lured aboard to oversee international coordination effective Oct. 1.

• North American manufacturing is bulked up via plans to build a new engine plant in Mexico to supply the Chattanooga, TN, and Puebla, Mexico car assembly plants.

The $550 million project, located in the central city of Silao, will enable output of 330,000 engines annually.

• The new Amarok pickup gets off to a strong start, forcing the auto maker to consider additional capacity less than 12 months into production.

Output was launched in November 2009 at the Pacheco, Argentina, plant, but by September the possibility of adding the vehicle into the mix at the Hanover, Germany, plant, is in discussion.

Long-term, the auto maker is aiming for global production of more than 200,000 Amaroks. Hanover output could begin as early as mid-2012.