VW Expected To Take Top Spot

Volkswagen is expected to become the world’s biggest carmaker this year – a full seven years earlier than its management’s aim to replace Toyota in the industry’s top spot, according to three leading consultancies. Anchor Lisa Mullins speaks with auto industry reporter John Reed of the Financial Times about predictions that Volkswagen will overtake Toyota this year as the world’s top car maker.

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Lisa Mullins: It was just a few years ago that Toyota edged out General Motors to become the biggest car maker in the globe. Well, get ready for another change at the top now. German automaker Volkswagen is projected to become the new No. 1 this year. It’s a remarkable turnaround for VW. Most analysts had written the company off a few years back due to some of the highest labor costs in the industry. To explain Volkswagen’s transformation, we turn now to John Reed who covers the automotive industry for the Financial Times in London. How has VW done this well ahead of its own projections in fact?

John Reed: Well, it’s a function of two things. It’s partly VW’s performance. It’s also, I have to say if you look at the league tables, a function of the problems that Toyota suffered this year from the earthquake in Japan that cut into their output this year, so that pushed them then down a little. But separately of that, VW is going gangbusters in most of the main markets of the world.

Mullins: Which particular models are the biggest sellers?

Reed: I think the ‘Golf’ is their bestselling model worldwide, but one of the things that they are doing intelligently is catering to every market there is. So, in Brazil, they have a small car that’s called the ‘Gol’ which is one of the bestselling models there as well.

Mullins: You mean ‘Gol’ as in “Goal!” [laughs] in soccer?

Reed: Goal, yeah, exactly [laughs]. It’s spelt G-O-L. Not to be confused with the ‘Golf’.

Mullins: You mentioned that this is in part due to VW’s business acumen being able to please each market in different ways. How about Toyota’s misfortune, certainly because of the devastating earthquake that shut down a lot of Toyota plants, disrupted the supply lines? But also, Toyota as we know here in the United States has had a lot of bad publicity surrounding these recalls and consumer complaints and investigations.

Reed: Absolutely. Although, I think in fairness to Toyota, that’s largely behind them now. What we are seeing this year in terms of their sales lagging a bit is largely due to the earthquake in Japan.

Mullins: What’s stopping an American manufacturer, GM or another, from being the world’s biggest car maker?

Reed: Nothing is stopping GM or anyone else from breaking into this. I have to say it is a slightly artificial construct that we who follow the auto industry indulge a little bit, the league table. And one company that we haven’t spoken about in this interview is GM which has made quite a spectacular comeback itself from much more serious problems than Volkswagen was in. They have come out of that and are selling very well in all of their markets as well.

Mullins: That’s interesting. You are saying that VW may not hold on to this top spot for too long once Toyota gets beyond the after-effects of the earthquake. GM is still pretty much in tight competition. Is there no difference among the different cars that they sell? Or is it all kind of marketing and distribution?

Reed: It’s not that there is no difference among the cars. Again, it’s down to the sheer numbers of who sells more in a given year. And again, that also depends on the region. So, if Europe is going to have a bad year, it could be worse for Volkswagen if the Euro Zone goes into a very serious crisis. Or, China has an especially bad year, that’s probably bad for Volkswagen.

Mullins: What are the prospects for Volkswagen staying, if not on top, then pretty high up there long term?

Reed: I think they are extremely good. Again, barring an unforeseen crisis, the title of the world’s largest car maker has, as you will appreciate, been a bit of a poisoned chalice for both GM and Toyota in turn; so never say never. But that said, VW is absolutely on the right track right now in terms of products, in terms of management and in terms of managing its costs.

Mullins: Thank you John Reed of the Financial Times talking to us about predictions that Volkswagen is going to take over Toyota this year as the world’s No. 1 auto maker; nice to have you on the program.

Reed: Thank you.

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