Volkswagen Doesn't Want To Be Seen as a Detroit Automaker

Posted by: David Kiley on August 31, 2007

Volkswagen is considering moving its headquarters from Auburn Hills, MI to California to be closer to the cultural action, and to be better able to recruit executive talent.

Given the hub-bub this is causing in Michigan, already decimated by white collar job loss from GM, Ford, and Chrysler, it’s worth a quick trip down memory lane about why VW’s headquarters is here at all when Mercedes-Benz and BMW are in New Jersey. Volvo was in NJ, too, until Ford moved it to California to be part of the Premier Auto Group. Porsche, which pretty much controls VW now, used to be in Connecticut, but now resides in Atlanta.

Indeed, while many Germans favor moving VW to California, New Jersey, Boston and Atlanta appear to be on the table as well.

Back in the early 1970s, former GM executive James McLernon ran VW of America, which was based in New Jersey with the other import car makers. VW was building a manufacturing plant in Westmoreland, PA and had a second plant on the drawing boards in Sterling Heights, MI. McLernon, and VW’s manufacturing chief Richard Dauch (later to be founder and CEO of American Axle) hated living and working in NJ. And to them, if VW was going to be a manufacturing entity, they needed to be amidst the supplier community in Detroit. So, so long to Englewood Cliffs, NJ and the New York skyline, and hello to Detroit and a view of the Ambassador Bridge to Canada.

Later, VW sold the Sterling Heights plant to Chrysler before it built a single car there. And it closed Westmoreland in the late 1980s. Ironically, now VW is talking again about building or buying a manufacturing plant in the U.S. And at the same time, it’s making a alot of noise about getting out of Motown where the supplier community is. If I had to guess where VW is scouting locations for a plant, I’d say Alabama, where several German suppliers are already located for Mercedes-Benz, or South Carolina where they are located to service BMW’s plant.

It’s difficult to say for sure if VW has suffered from being in Auburn Hills, MI. True, there isn’t much culture in the I-75 corridor. And I suppose there have been executives who said No to working at Volkswagen and Audi for reasons of geography. But former Mercedes exec Gerd Klaus moved from NJ to Detroit to run Volkswagen of America. Bill Young moved from LA to Detroit for the same job. Perhaps the best marketing exec VW ever had, Steve Wilhite, moved from California to Auburn Hills to take the job. Current Audi of America marketing chief Scott Keogh left NJ and NYC for Auburn Hills. But one of his predecessors, in fact, left Audi for California prematurely, stifling under the cultural stagnation of the Northern Detroit suburbs.

And, of course, there is the constant flow of visiting Germans. Not that VW AG home in Wolfsburg, Germany is any kind if cultural mecca. It’s about as interesting as Toledo, Ohio. What is amusing is how when you talk to some of VW’s German execs, they actually don’t understand that Detroit has a three-hour time difference with LA. I have even heard stories of German executives attending the LA Auto Show, when it ran back-to-back with Detroit’s, and trying to make make arrangements to drive from one show to the other until they found out it would take a week. But one wonders how much LA looms as a possibility for VW when there is a nine hour time difference between there and Germany, and the flights are five hours longer.

Nissan, of course, moved from LA to Nashville, TN in part because of how expensive it was becoming to have its headquarters in the most expensive area in the country.

I’m a skeptic that moving to LA or even New York City is a necessary move for a company like VW that is already losing a lot of money in the U.S. The real estate is far higher in both places than in Michigan. Perhaps it’s really a play to turn the headquarters personnel over. I believe that if people opt out of the move, it doesn’t cost VW nearly as much to reduce staff, or replace them. That’s the cynical view, of course.

Here is an idea. Move the headquarters and product development center to Ann Arbor,MI about 60 or so miles from Auburn Hills. The University of Michigan is here, as are product development centers for Toyota and Hyundai. The town, because of the University, has a global populace. The international University population gives you as good a window into cultural trends as any place in the world. I have never met the European or Asian executive who complained about his or her tour of duty in Ann Arbor the way I hear complaints about moving from, say, Germany or the U.K. to Dearborn, MI or Auburn Hills. And with Pfizer having recently left Ann Arbor, there is a nice set of buildings ready to move into.

Yes, I live in Ann Arbor, and it might help my real estate value a little. But really, it is my pitch to perhaps keep VW from making as big a mistake as they did 35 years ago moving out of NJ to Michigan.

Here’s a question. Are Honda and Toyota really successful in the U.S. because they are located in Califirnia? Perhaps VW would be interested to know that vehicles such as the Toyota Avalon, Tundra and Camry were developed in Ann Arbor. Are GM, Ford and Chrysler struggling because they are located in Detroit? I don’t think so.

Reader Comments

car fan

September 1, 2007 9:49 PM

Has anyone read the new Ford book - Ford and the American Dream by Clifton Lambreth,Mary Calia,Melissa Webb and Pat Doyle. This book outline the perils facing the American automobile industry and Ford. It is a great story about what Henry Ford would do today if alive. It is a must read for every car enthusiast or business person. The lesson learn apply to every business in the world regardless of industry.

www.thefordbook.com

Alex P

September 4, 2007 9:07 AM

VW's decisions are all mixed up. VWoA should firstly fix the lousy quality of its cars. Secondly, hire the right executives to run the company. And lastly, worry about moving its HQ somewhere else.
Come on...

mikey

September 4, 2007 2:15 PM

This is business week, right? Then you must realize that moving a headquarters, whatever the public 'reason', is really just a way to weed out the dead wood and start over. Having been in Detroit for many years, I'm sure VW has accumulated a lot of the band of fools that populate the former big 3. A great way to drop them: leave them behind as more layoff carnage. Maybe they can move back to their former employers to 'finish them off'!

Who Knows

September 5, 2007 7:22 AM

As a VW Worker I am devastated, I've devoted the last 5 years of my life working for this company. I am not an executive nor anyone high up in the company... Just someone who loves the brand and gives all I have to the company asking for nothing in return but to keep my job. It's said and done just a matter of how quickly we're w/o jobs...
:o(

Steve M.

September 5, 2007 7:27 AM

David points to four (4!) executives from outside the area who were willing to move there, but those are the high-paid, top-of-the-pyramid guys. Volkswagen has long suffered a disconnect between wanting to be different, while populating the company with GM, Ford, and Chrysler veterans. Culture is hard to define, but VW's culture became indistinguishable from the Big 3 after Frank McGuire left. He was a VW lifer who embodied the brand, we were sorry to see him go.

Tara F.

September 5, 2007 12:37 PM

Brin Gerd Klaus back to VW!

tjake

September 11, 2007 7:04 PM

Mr. Kiley mentioned the decision for the move was to shed employees from the company as the cynical view. Not cynical Dave, but dead on! Mr. Jacoby is keeping those who made the mistakes and castrating those who followed orders.

To Steve M.
Mr. McGuire I agree was a true gentlemen and a car guy. Not like the accountants coming out of Deutschland. Accountants should work with debits and credits not run auto companies. Spend a dollar to save a dime is the VW way. Virginia is not going to fix this German mindset/mentality.

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