No. of Recommendations: 2
VW is suffering from decades of hubris and mismanagement. Their problems started when then CEO Piëch went into empire building mode in the 90s. The company has been carrying a portfolio of vanity projects, Lamborghini, Ducati, Bentley, and Bugatti. Close to a decade ago, Fiat-Chrysler CEO Marchionne commented "Bugatti is the biggest waste of capital I have ever seen". Additionally, Volkswagen AG has, now, four mass market brands: VW, Skoda, SEAT and Cupra, all building out of the same parts bin, and selling to the same market, but with four sets of administrative overhead, when there should only be one. A decade ago, the head of the German labor union criticized management, over how much they spend developing, producing, and marketing, redundant models. GM cleaned house, eliminating Olds, Pontiac, and Saturn. Ford dropped Mercury. Chrysler dropped Plymouth. But each line worker at VAG has a massive amount of bureaucratic redundancy and waste on his back.
So, of course, McKinsey sold VAG the same business plan they try to sell to most of their clients: production headcount reduction, while the bureaucratic overhead continues. All very reminiscent of Radio Shack, that figured they could make up for their overhead expense percent being double that of Best Buy, by beating up on their store staff.
Steve
