by J Kraus
While members of the Porsche and Piech families gather today in Salzburg to confront the reality of the €9 Billion of debt they have assumed in taking control of Volkswagen, search for Arab investors to ride to their rescue and decide how to integrate the two companies, there is another long-term issue within the VW-Porsche empire.
While Toyota concentrate their efforts and resources developing and marketing three major automotive brands (Toyota, Lexus and Scion); Volkswagen-Porsche is currently host to no less than eight (Skoda, VW, SEAT, Audi, Porsche, Lamborghini, Bentley and Bugatti.) What no one seems to notice is that VW is following the classic GM playbook to the letter, only with even more brands. This strategy worked well for GM…until it didn’t.
At the heart of the market, VW covers most sizes and price points with overlapping offerings from Skoda, VW, SEAT and Audi. VW make all manner of marketing justifications and will describe how each brand is unique and appeals to different slices of the market, just as we heard from a succession of managements at GM. As an example, VW profess that the SEAT and Audi brands appeal to the more sporting driver. If one accepts that rationale, than one must ask why VW offers GTI versions of the Golf and Polo, and are reintroducing the Scirocco. Are those models not sporting?
At the end of the day, the more mainstream Volkswagen products are basically VW’s under the skin. Dressed down in jeans and a tee shirt, they are sold as Skodas. Wrapped in Balenciaga jackets they are proffered as SEAT’s. Clothed in Hugo Boss suits they are offered as Audis. You can fool some people some of the time… but for how long?
In the luxury sedan market, to compete with its own Audi A8, VW brought us the VW Phaeton. Later this year, the Porsche Panamera will battle against the Audi S8.
In the sports car market, they now have the various versions of the Porsche 911, the Lamborghini Gallardo, and the Audi R8 all competing in the same arena.
The Panamera is the second recent Porsche to utilize VW engines. As the sought-after consolidations and cost reductions continue (VW chief Martin Winterkorn stated that VW offers a “gold mine of savings potential”), the ensuing cross-sharing and badge-engineering will continue to slowly erode remaining brand distinctions.
President Obama’s Automotive Task Force noted that GM’s many brands “distract the focus of its management team, demand increasingly scarce marketing dollars, and are a lingering drag on consumer perception…” This same observation could be applied to the current state of affairs at VW-Porsche. Besides GM, there is only one other company in automotive history to offer this many brands: British Leyland. It did not end well for them.
In 2006, VW spent considerable funds in an attempt to launch the SEAT brand in South Africa. It failed and they left the market in 2008. The Phaeton was withdrawn from the U.S. market. First signs of trouble? Will Porsche continue to allow in-house competition from Audi and Lamborghini?
As an automotive enthusiast, I believe that the more brands to choose from, the better. Unfortunately, experience has shown that when too many brands are brought under one roof, they inevitably become more and more alike until they are all but indiscernible.