Quarterly financial reports and boardroom gossip are starting to arrive at The Morning Dump HQ from Europe, and someone better call Isaac Brock, because I’ve got good news for people who love bad news. Specifically, profits are dwindling and problems are multiplying.
Volkswagen hasn’t reported yet, but a three-bylined behind-the-scenes story says Volkswagen Group’s main leadership realize that the concept of building a bunch of cars in Germany and selling them other places doesn’t work anymore. To some extent, Mercedes already came to that conclusion, but headwinds in China and the United States are taking a bite out of profits. At least Mercedes is making money. For all his efforts, Lawrence Stroll has yet to make Aston Martin profitable.
Can you make a lot of money by designing a LEGO model of a car? I sort of don’t think so, but maybe this guy can get his sweet Renault built.
Volkswagen, As A Concept, Doesn’t Work Anymore
You know it’s a bad day when I use this guy’s picture. Other than Carlos Tavares (not pictured), I think Fritz here is the most commonly used image here in The Morning Dump. He’s just got that perfect this bullshit again? look on his face.
Volkswagen is realizing, slowly, that the historic concept of Volkswagen doesn’t work. Here’s a big story from Automotive News that shows the company coming to that difficult conclusion:
Volkswagen Group’s top leadership concluded that the automaker’s long-standing business model is no longer sustainable, setting the stage for deeper restructuring, capacity reductions and a sharper shift toward local production in key markets.
VW Group’s management and supervisory boards reached the conclusion during a meeting on April 27, according to people familiar with the matter. While no formal decisions were taken, the conclusion underscores mounting pressure on the group to adapt to a more fragmented global trade environment and faster technological change.
For decades, VW relied on developing vehicles in Germany and exporting them or producing localized versions abroad. That model is increasingly strained by U.S. tariffs, EU-China trade tensions and the capital-intensive shift to electric vehicles, which requires new platforms and battery production.
That is a tough pill to swallow, especially for a company that’s literally owned in part by the German state of Lower Saxony and represents, in a larger sense, Germany’s once-heralded production might. The math is the math, though, and Volkswagen recently had enough capacity to build 12 million cars a year. It expects to need about 9 million cars worth of capacity.
A few years ago, Volkswagen could have probably kept more of its production in Germany, but tariffs and other considerations makes that less practical. One of the reasons that Scout is so important for Volkswagen is that Scout will be built in the United States, which is a place where Volkswagen’s various brands sell a lot of cars, but the company builds relatively few of them. That just doesn’t work anymore.
This is also tough for Porsche, though Porsche is a high margin brand that can take a little bit of a hit. What’s Audi going to do in all of this?
The strange part about all of this is that, growing up, you bought a German car because it was built in Germany. The being-built-in-Germany part implied a certain quality. It was the Ultimate Driving Machine or Vorsprung durch Technik. Even Volkswagen knew that was not entirely sustainable, and opened plants in China, South America, the United States, and other European countries. A good chunk of the VWs you grew up with were probably made in Mexico.
Understandably, though, Volkswagen kept an awful lot of plants in Germany itself: Wolfsburg, Zwickau, Hanoever, Dresden, Osnabrück, Emden, Kassel, and other places. The company seems to have decided, at some level, that this can’t continue, even if it’s just a matter of building something else (drones) in those plants.
Mercedes Sees Profits Drop, But It’s Not As Bad As It Could Have Been
Mercedes-Benz is an automaker with a large number of facilities in Europe, as well, but it’s less German-centric in its production, having embraced places as far flung as Alabama and Fuzhou.
Still, China is a rough place to sell cars now, and Mercedes doesn’t build everything it sells in the American market within the borders of the United States. As Reuters reports, a better-than-expected Q1 is still down from last year:
The automaker reported earnings before interest and tax (EBIT) of €1.9 billion euros ($2.22 billion), down 17 percent, but higher than the average analyst estimate of €1.6 billion.
Steep tariffs, China woes and a rocky transition to electric vehicles have weighed heavily on German automakers such as Mercedes, whose CEO Ola Kallenius has turned to sweeping job and cost cuts to stem losses while rolling out a cascade of new models.
The Stuttgart-based company on April 29 reported first-quarter revenue of €31.6 billion, missing analyst estimates for €31.8 billion.
Selling cars is hard, and making money selling cars is harder, but being in the black is way better than being in the red.
Aston Martin Goes Further In Debt
Aston Martin’s customers might be in Valhalla, but its investors might feel a little differently after the company posted yet another loss.
Aston Martin Lagonda Global Holdings Plc reported another quarterly loss as billionaire Lawrence Stroll’s consortium put up a further £50 million ($68 million) in an attempt to ease the pressure on the embattled carmaker.
The British company’s pretax loss narrowed slightly to £65.5 million in the first quarter from a year earlier, it said Wednesday. Net debt swelled to £1.46 billion, underscoring the challenge it faces.
Shares of Aston Martin rose 6.2% in early trading in London, buoyed by news of the £50 million facility with certain members of Stroll’s consortium. The stock, which has lost most of its value since listing in 2018, is down by more than a third this year.
A turnaround doesn’t happen overnight. Here’s a crazy idea: Scout is looking for a partner, right? What if Scout built an Aston Martin-based Defender-like competitor in South Carolina?
Check Out This Cool Lego Renault
Here’s a fun story to wrap up the morning. British LEGO fan and designer Dave Collins, aka devonbricks, has made his own brick version of the Renault 5 Turbo 3E and Renault, rather than getting cranky and throwing an IP fit, is actually supporting Dave in his quest to get the thing turned into a real LEGO kit.
Now submitted to the LEGO® Ideas platform, it needs 10,000 supporters to progress to the next stage, where it could be selected for production as an official LEGO® set. Renault is urging fans of the brand, the original Renault 5, the new Renault 5 and LEGO® itself to get behind the project and help make it happen.
At its heart is a blend of nostalgia and reinvention that defines the Renault 5 story. The original Turbo models of the 1980s left a lasting impression with their wild looks and attitude, while the all-electric Renault 5 Turbo 3E reimagines that energy for a new generation. With just 1,980 examples of the real £140,000 Renault 5 Turbo 3E set to be built, the LEGO® version offers the chance for more people to own a piece of that story.
You can go to the LEGO platform page here and support his idea.
What I’m Listening To While Writing TMD
I was not aware that there was a music video for Wolf Parade’s “I’ll Believe In Anything,” but after watching the fifth episode of that show Alanis can’t stop talking about, I don’t think it will ever really need a video again. Also, this song was produced by Isaac Brock! How’s that for full circle?
The Big Question
What’s your favorite VW of all time?
Top photo: Volkswagen
The problem with the German auto industry is not unique to Volkswagen. As the article said you used to buy a german car for the engineering. In the 2000s the global auto industry started all using the same suppliers, and started trading engineers and designers and executives around like Pokémon cards. The differentiation just wasn’t there anymore.
Meanwhile the Japanese had reset the bar for quality while the germans became known more for complexity and gimmickry. Volkswagen is struggling the most because of its mainstream market position, but the Mercedes, Audi and Porsche brands are right behind. BMW has managed to find some product mojo to stave off the problems for now but they’re still one bad design cycle from being in the same boat as the rest.
Too many good choices, so I’ll go with my favorite drop top – the Volkswagen Cabriolet Hebmuller. So much prettier than the later version by Karmann. Shame a factory fire in 1949 put an end to them.
Good choice! There were some really cool bodies before the Type 14. Beutler and Rometsch’s banana come to mind.
https://youtu.be/7LIqSY488r4
Just here to say I’d LOVE to go on that VW BUS(!) roller coaster in top shot…ha ha
Tough call for me my favorites include Mk4 jeta tdi, mk6 Jetta tdi, Mk4 gti, egolf. I have always admired a karmann ghia and thing. The only one I’ve looked for recently is an egolf. It’s basically a go kart. So maybe egolf. I did enjoy my mk6 Jetta tdi alot just not sure I would want one now.
Favorite would be the glorious brown Westphalia Vanagon camper my grandparents had in the 80-90s. Currently I have a ID.4 that I really, really like despite the fact that a few perplexing “features” make me wonder if anyone employed by VW ever actually drove a prototype at any point before the design was locked in and sent down the assembly line.
914 (yeah, that was a VW) followed by first generation Sirrocco, and I wouldn’t throw a Type 2 out of my garage…
Favorite VW of all time would probably be a 412 wagon, though I have never owned one. I just think they are cool. My favorite that I owned just by a hair was my ’84 Jetta GLI that got me through most of college and law school and years of fun after. My ’02 Golf TDI and ’17 GTI Sports (both bought new) were tied for a very close second – but that ’84 was a very special car. All the VWs I have owned were great (also had a ’90 Jetta GLI and an ’85 Jetta 2dr), and they were all very reliable. I don’t know what average Americans do to them that the rest of the world doesn’t. I have lots of friends with VWs and their experiences match mine, and not at all what the Internet Peanut Gallery would lead one to believe.
But making them even LESS German than they already are today (at least in the US where they sell almost entirely dreck already at this point) removes any reason at all to even consider them. I bought VWs *because* they were the cheapest entry to the German car experience., and in the case of the the TDI, rather unique in the market.
I don’t care where they make German cars. I care that they are expensive to buy, unreliable, and expensive to fix.
What VW really needs to do is make better cars.
Toyota has no problem designing their cars in Japan and making them in Japan or making localized versions elsewhere.
Wait, doesn’t VW have their own development in Mexico and Brazil? For example, the Jetta is mostly designed in Mexico, not to mention Brazil’s weird shit.
VW should’ve sold the Up up here! They could’ve sold us the South American version from Brazil, which has some improvements over the Euro Up (full size spare, bigger gas tank, and roll-down rear windows instead of pop-up).
The best VW ever made was the Taro (rebadged Hilux). If that doesn’t count, then the Thing.
“What VW really needs to do is make better cars.”
I think you’re right about this. VW makes some nice cars, but they have way too many quality problems. One of my friends bought a Passat(?) about a year ago and it’s a nice car, but it went into limp mode and told him to pull over a couple weeks ago. It’s under warranty, but it shouldn’t have happened. And issues like this aren’t new. Less catastrophic, but still ridiculous was the 3 year old passat I had in ’02. Three window regulators broke in the year that I owned it. I finally dumped it because it developed an intermittent racing engine at idle. Otherwise it was a pretty nice car.
Maybe if they focused on quality, they’re reputation would help them at times like this instead of hindering them.
What VW really needs to do is make better cars.
This. Simply put, they could continue making cars in Germany if said cars weren’t big steaming piles of $(#€!$$€. The ID.Polo gives me hope that may change.
And the best VW is definitely the Type 147 Fridolin. I remember the last ones in the service of the Deutsche Bundespost before they were retired.
Also, German brands have to come to the realization that their cars aren’t special enough anymore to warrant high needs/costly/specialized maintenance.
I’ll take a Karmann Ghia convertible or Squareback. But with modern safety and comfort amenities…
Rabbit. Golf 1, if you insist.
I wonder where you found that picture of the VW worker. I can’t find it in VW’s media library anywhere (but there are similar pictures in there). But it has been used by some other publications, so it has to be out there somewhere.
My gut-feel assumption is that he is named Klaus, not Fritz, by the way.
I think it’s a screenshot from SNL. 😉
Kind of a difficult question, something that I appreciate from VW is the no risk judgment they took in the past to release iconic vehicles on their respective segment.
From unique powertrains, nice interiors, good driving dynamics, quirky stuff. I have a sweet spot for the Jetta A4 either 1.9 TDI, 1.8T or VR6.
I parked my MKIV Jetta (decidedly uncool) across from a stunning shade of blue Golf R that looked really new, but still had a manual transmission, maybe MK7.5 (VII.V?). and it was at the time the coolest car I had come across in a while. Nothing but pragmatic decisions in my future but were I a bit more reckless with what little money I do have, that would easily best the diesel Rabbit and Passat wagons my family had.
“What’s your favorite VW of all time?”
The Race-Taxi.
https://www.youtube.com/watch?v=59j-a86YU9M
Glad to see so much love for the Scirocco here, I thought that was the coolest car when I was a kid. I also loved the original GTI. It’s funny because prior to those cars, my opinion of VW was that they were deeply uncool, what with their underpowered engines and styling that hadn’t changed since ancient times (the 60s).
The introduction of the Rabbit seemed like VW was finally acknowledging the need to make a compact car for (then-)modern times. But the Scirocco was the first VW that ever made me think “No other car is close to this”.
(Keep in mind that all of my impressions of VW were from the perspective of the USA, where we were denied some of VW’s most notable cars like the Golf/Rabbit and the Passat sedan for years before they finally made it over here.)
Favorite VW: Karmann Ghia
I regret selling mine even though it would likely end up like David’s beloved first XJ, which is to say in a non-running state parked somewhere and covered in dust/detritus.
The video box that usually shows David apparently freezing while riding with Beau has recently been showing me a 1:38 clip of euphemisms for jacking off; odd. Apparently I need to ejaculate 24 times a month to beat cancer and I learned it here on The Autopian.
First gen Scirocco.
The VW Brasilia. It was one of the first truly Brazilian cars I encountered on my first trip to Brazil in 2004. There’s something very cool about the looks of them, and I already had an appreciation for air-cooled VWs in general from my ownership of a ’73 Karmann Ghia. Plus, seeing one always takes me back to that first trip. I proposed to my girlfriend (now wife of 22 years) under the Christo Redentor statue in Rio on the second day there, thus the positive memories associated with that adventure are myriad.
Still planning to retire to Brazil at some point, at least for half of each year when that time comes. My first large purchase after getting settled is going to be one of these. Can’t wait to cruise around town with a proper green can of Guaraná Antarctica in hand, just giving everyone a thumbs up with a big grin.
There was an even more logical 4 door Brasilia, but it was made almost entirely for export since Brazilian car buyers in the ’70s and ’80s treated 4-door cars like the steering wheel was covered with pus.
Of VWs that I have owned? A toss up between the ’67 squareback I bought in ’78 and still own, and my first bus, a ’64 21 window sunroof bus that was utterly reliable but top speed was 54 MPH. Favorite VW that I have not owned is a Type 3 Ghia, yummy. But then again I still want a Thing and a Dune buggy . . .
Favorite VW, Volkswagen Thing/181.
VW currently seems to be where GM was in the mid-eighties. Their current offerings are flawed and the plans for the next 20 years are likely baked in. I remember looking at the GM portfolio back then and thinking, “Oh, no.”
I have so many questions for VW, here are two. Why the relentless push upmarket when you have Audi… and Bentley… and Lamborghini… and Porsche? And why was the successful Guigiaro design language (Golf, Dasher, Scirocco) abandoned in favor of squinty blobs?
What’s your favorite VW of all time?
Well, I’ve only owned one, a ’60 Type 2 Transporter way back in the day. So that has the most fond memories but if I had to choose another, a Type 2 pickup would be cool…
Welp, Torch would probably slap me across the face and say (in his best Sean Connery impersonation) “That’s for blasphemy,” but I loved the first generation of the New Beetle. It had all of the whimsy of the old one, but with modern comforts like…um, comfort, along with enough power to go up hills and such. Give me one with the 1.8T and the six speed, and I could be quite happy. Or a q.8t convertible.
Jason Cammisa’s Cabrio is also a bitchin’ bitch basket.
they concluded that they need to diversify manufacturing locations, yet they still insist on delaying their most promising product to be built in America? Strange
The strange part about all of this is that, growing up, you bought a German car because it was built in Germany. The being-built-in-Germany part implied a certain quality. It was the Ultimate Driving Machine or Vorsprung durch Technik.
The problem IMO is not they stopped building cars like this and now make cars that are lucky to survive the warranty without something going terribly wrong.
“What’s your favorite VW of all time?”
My Scirocco. It was a lot more reliable and fun to drive than most cars including out Porsche 924 turbo. If I knew then what I know now I could have easily have fixed the few annoying problems it had