March 1, 2016
Touching back on the M&A (Mergers and Acquisitions) effect, Volkswagen Auto Group (VW AG) was an outlier immune to their effects due their business model. VW AG was aware that in order to stay buoyant, they needed to balance their resources by building the base out before building up. Basically, Volkswagen embodied a pyramid. VW AG has Hitler to thank for their success. I know that is an awful way to start this explanation, but it is accurate. It was he that forced Ferdinand Porsche to spend time and money designing what he described as a car for the people, the Volkswagen Beetle. Hitler was an atrocious person, but the Type 1 (Beetle) was his only great contribution to the progression of society. After the war and the evil man’s death, the Beetle kept selling millions of carbon copies (though not until the 1950s); making Volkswagen quite a mound of Marks in the process. That excess served as their nest egg, with that money they were able to buy more automakers. The key to Volkswagen’s success has been their building from the bottom up. Instead of shooting straight for a high margin brand to balance the low margin mass sales, they manufactured more mass market minimalist automobile based on the Type 1. Thusly, they always had a reliable source of income from the bottom. Eventually their excess grew large enough to go into riskier sales. This is where Automobile Union AG (predecessor to Audi) enters. They were a another mass market brand, that Volkswagen eventually merged with another everyman-mobile maker; NSU Motorenwerke. VW AG integrated their technology, then made them into a premium brand right above their entry-level base. After setting a base of minimalist, fun, rear wheel drive reliable-mobiles (not quite like the Corolla effect mold, because they lacked a convenient automatic transmission). Audi AG became the second step of VW AG’s pyramid (as opposed to an M&A style Jenga tower). Unfortunately, while VW AG was not a victim of the M&A Auto Group culture; they did fall to the charms of Crapolla Effect. In the 1980s, they began building a boring fleet of front wheel drive frump-mobiles. What’s worse, the second step of the pyramid; the Audi ; had to battle bad press in the 1980s. Their cars were equipped with new pedal placement foreign to pure automatic drivers. Instead of making a huge bar brake like the competition, Audi offered a small brake pedal traditional to a car with a clutch (I suppose to cut on redundancies). This placement was used as fodder in a war for the entry-level premium sedan. At the time Volkswagen, was proud be king of said segment with their second rung four ring brand’s brand new 5000. That was, until 60 Minutes did piece claiming Audi was responsible for unintended acceleration. In spite of the National Highway Traffic Safety Administration (NHTSA) exonerating Audi of wrongdoing (people were accidentally hitting the gas instead of the brakes), under educated buyers continued to blame the badge. Had Volkswagen shot for utter opulence like Bugatti, Bentley, or Lamborghini right off the bat, they would not have been able to survive an unavoidable hiccup (like Audi was victim to). However, thanks to prudence, not only was Volkswagen AG able to outlast the lies; they eventually bought all of the aforementioned extravagant brands. All thanks to being a patient outlier… Until the Wrath of Winterkorn.