Volkswagen Uber Alles

Commentary

To hear U.S. auto makers tell it, the days of using a barn-full of brands are over. General Motors is dumping five brands. Ford got rid of three and may drop another. Chrysler axed one.

The rationale behind all this pruning is to slash the horrific cost of maintaining so many different nameplates and concentrate on a few core brands.

For the time being, it’s a good strategy. But maybe the Detroit Three just never learned how to do it right, or maybe they forgot how they used to do it. After all, back when GM dominated the American market, it had six healthy brands that blanketed every segment.

Of course, back when GM was great, Chevrolet, Cadillac, Buick, Oldsmobile, Pontiac and GMC actually were stand-alone car companies that controlled their own destiny. The auto maker’s downfall started when it began forcing brands to share platforms and sell rebadged versions of the same vehicles.

The brands lost their cachet because products became so bland. That’s what happens when auto makers push for mass commonization. But one auto maker stands alone in the world, proudly boasting of its big-brand strategy. I’m talking about the Volkswagen Group, whose brand lineup includes VW, Audi, Seat, Skoda, Bentley, Bugatti, Lamborghini and, soon, Porsche.

Amazingly, VW is making it work. Its sales have fallen far less than GM’s or Toyota’s during the Great Collapse of the last year, and it is picking up big market-share gains.

Even more impressively, VW still is profitable on both an operating and after-tax basis, the only major auto maker in the world that can make that claim. Honda is profitable overall, too, but is losing money on its automotive operations.

So why is VW successful at maintaining so many brands while others have failed? Because the parent company gives these brands a tremendous amount of autonomy.

Like the GM of old, VW’s brands are operated as stand-alone car companies. Not only do they have full profit-and-loss responsibility, they even issue their own annual reports!

While VW brands share components and some vehicle architectures, it’s not done to nearly the degree the Detroit Three once did. And each brand pretty much has its own manufacturing operations. VW has succeeded by maintaining a fine balance between centralization and decentralization. Alfred Sloan, GM’s famous chairman who fiercely believed in decentralization, would nod approvingly.

The results of this business model are unique vehicles and brands that allow VW to cover a wider swath of the marketplace than any of its competitors. No wonder it is gaining global market share.

While much of the media have focused on Toyota gaining the No.1 ranking in the world, and others wonder if GM can ever recapture that title, they are missing the big story.

I’m betting that sometime in the next decade VW will emerge as the world’s largest auto maker. Indeed, I think it will happen faster than most would think possible.

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline” for WTVS-Channel 56, Detroit and “Autoline Daily,” the online video newscast.