SSO Report - VW Group & Stellantis

[blueline]

The latest SSO Report headline:

Stellantis & the VW Group: Automotive Titanics?

https://ssoreport.com/automotive-titanics

Some copy from the article:

Volkswagen AG Chief Executive Officer Oliver Blume was in Wolfsburg this week. At a meeting with thousands of workers he stated, “We, the management, are not operating in a world of make-believe” & “The current situation is serious, new competitors are entering the market with unprecedented force. The price pressure is immense.”

...the VW approach seems to continue to lurch from crisis to crisis. Coming out of the Financial Times, Future of the Car Summit back in May, I thought that with the rise of low priced Chinese EVs, the VW brand was looking at a potential extinction event (see: FT Future of the Car). Six months later, VW is in full on panic mode.

In my experience I have yet to see any 20 member committee that was clear, agile, and quick in its decision making. To top it off, Volkswagen’s CEO Oliver Blume, also happens to be holding two jobs. Blume is also CEO of Porsche, which just by chance has very similar issues to VW. Having lived Germany, I am very aware of its high cost of living, I am pretty sure Blume doesn’t need to hold two jobs to make ends meet.

[Tom]

Does Porsche really have similar issues to VW?

[blueline]

Does Porsche really have similar issues to VW?

Well, they're all in the same corporate boat. Their fortunes (or lack thereof) as currently structured are tied at the hip. The company (Porsche SE who owns VW Group) has massive debt and a lot of serious systemic problems they're facing. I imagine all will work out in the end but the road ahead will be challenging to say the least.

There have been three CEOs since 2015 and none have been able to right the ship sufficiently to quell disgruntled workers, meddling governments, or regular customers unaccustomed to the new, abrupt hurdles of doing business - ie: buying a new Porsche, halo car or otherwise. But to your point, yes, VW the brand is apparently the one in the most serious serious trouble out of those under the VW Group umbrella.

Porsche SE with Blume at the head (in addition to being VW Group's CEO) has all the VW Group brands' fortunes and future under his control and I don't have confidence that he can get the company back on track. VW Group controls/owns VW, Porsche, Lamborghini, Audi, Bentley and several others, so all of those marques are tied to the financial fortunes of VW Group. I have no idea if the brands could be spun off to go their separate ways at this point but I doubt it would be easy and I have doubts they would survive if they did.

Regarding Porsche the brand, Taycan sales have fallen off the cliff from what were already horrible numbers. Porsche is pushing GT3 RS cars like crazy to try to offset the slide in the EVs. How? Well, the GT3 RS MSRP is sky high and, like all other Porsches - especially the GT cars - continues to go up exponentially. It's mind boggling how much the prices of new Porsches are going up. Want a 3RS? Ya gotta pay $100k over an already crazily high MSRP, plus lease or buy a Taycan, plus buy a $15k bespoke Porsche watch, plus take Euro delivery. Except for the crazy high ADM (that's on the dealers while Porsche looks the other way), Porsche is telling their dealers that if they want future allocations of other P-cars, the GT buyers must opt for Euro delivery, buy the bespoke $15k watch and buy a Taycan that will depreciate staggeringly upon delivery.

Interestingly, people are still lining up to pay that phenomenally ridiculous entry fee for the GT and specialty cars, so maybe the fountain of buyers is indeed endless. But I don't think so. All bubbles burst at some point.

[Stormy_Monday]

IMO, the problem with Stellantis and other car manufacturers, including VW, is they took their eyes off the US market. They put so much effort in selling in China. I don't understand how they could gloss over a communist country that has been continuously pushing a "buy Chinese" and anti luxury cars. Now a lot of the car companies are trying to put a band-aid on their Chinese operations, which will probably not work.

[WillyDaP]

I agree Stormy that is part of the problem, as they focused strongly on China and Europe where the EV mandates are super strong, and they did not really have a plan for the slow moving Infrastructure in most of the World. Some say that Toyota has done the best job listening to buyers while still moving technology forward, concentrating on Hybrids more than pure EVs. I have no doubt Electric vehicles will be huge in the coming decades , especially with new battery technology in the works, but your thoughts are quite true. The old adage of putting all one's eggs in one basket has proved true for VW, Stellantis, and others. We may even see Nissan become a part of Honda and for cost containment there will be more and more companies joining hands with mergers - imho. I hope VW Corporate sees this as a major wake up call especially with the US economy the only major power rocking and rolling over the past years. We all worry about inflation and other items, but sometimes we need to pause and realize how lucky we are here compared to other parts of the World. France, Germany, China all have big issues and compared to them we are in stellar shape, and VW should have viewed that their market here was the one they needed to focus and pay more attention to. Let's hope the Macan ( gas model ) stays even longer in the US market, since there is still demand. Will they wake up and continue the Cayman/Boxster in fuel form, one can only guess , but we have seen many Car Manufacturers shift gears after they set things in stone.

[SSO]

IMO, the problem with Stellantis and other car manufacturers, including VW, is they took their eyes off the US market. They put so much effort in selling in China. I don't understand how they could gloss over a communist country that has been continuously pushing a "buy Chinese" and anti luxury cars. Now a lot of the car companies are trying to put a band-aid on their Chinese operations, which will probably not work.

I have to disagree a bit. Stellantis is actually not over exposed in China. On the US, they milked it badly and got caught out as they delayed investment in product and quality. On VW, completely agree. I think they just fired the US head.

[Stormy_Monday]

IMO, the problem with Stellantis and other car manufacturers, including VW, is they took their eyes off the US market. They put so much effort in selling in China. I don't understand how they could gloss over a communist country that has been continuously pushing a "buy Chinese" and anti luxury cars. Now a lot of the car companies are trying to put a band-aid on their Chinese operations, which will probably not work.

I have to disagree a bit. Stellantis is actually not over exposed in China. On the US, they milked it badly and got caught out as they delayed investment in product and quality. On VW, completely agree. I think they just fired the US head.

I agree with Stellantis/China. But they seriously misjudged the US market for their cars. Seems to be a common ailment when a European takes over a US company. I lived this with ABB years ago.

A few months ago I read a quote by the PCNA head saying that they are now restarting to focus on the US market. It will be interesting to see how Porsche adjust their product line up to meet the US market and keep the bureaucrats in Brussels and Berlin happy. Fun stuff

[blueline]

From the Wall Street Journal this morning:

"Porsche SE To Take Up to $20.9 Billion Charge on Volkswagen Stake"

https://www.wsj.com/business/autos/pors ... _permalink

No crystal ball as it could get worse, but my hope is that this represents a possible nadir and turning point for the company (Porsche SE > VW Group > and the all the brands under VW including Porsche the manufacturer).

[blueline]

Some relatively positive developments for VW have come to be, possibly avoiding more severe hardships for both the employees and the company. Time will tell.

From WSJ yesterday: "Auto giant strikes agreement to cut billions of dollars in costs while avoiding factory closures"

https://www.wsj.com/business/volkswagen ... _permalink

"IG Metall, the German auto workers union, said the final negotiation lasted an unprecedented 70 hours."

[Stormy_Monday]

the cuts will have to come from somewhere. We should start a pool.....