Volkswagen: What's Going On With Chattanooga's Newest Resident - Part 2

Frank Fischer, Chairman and CEO of Chattanooga operations, said a few things about the previous factory, none of which were flattering: "The product did not have VW DNA – it was modified, maybe not ready for the U.S. market at the time," it was an unfinished Chrysler plant that was already ten years old when VW took over so "we were limited in the building and how it was set up," "We had a really high level of parts we were importing to the U.S., and the dollar was so weak at the time it didn't make any financial sense," and "The people were selected more on [seniority] and how long people were unemployed, not on capability and skills, and that was not very good."

None of those issues affect – or afflict, as it were – Chattanooga. Said Michael Macht, VW Group board member responsible for group production, "This is the flagship for the group's 62 plants worldwide. Our motto is 'commitment to quality.'"

Motto is right: If there were one word we heard more often than "Chattanooga," it was "quality." It was recalled so often we started looking around for Angela Lansbury, wondering if we weren't a modern Manchurian Candidate. It makes sense, as VW knows that no matter how much it slings ammo like 'German engineering' and 'detail oriented,' as far as North America has lately been concerned, the company has been shooting blanks at its bugbear. If you put any store in J.D. Powers' Initial Quality Survey, for at least the last six years VW has come in well below the industry average, and in 2010 it dropped back down to the dark days of 2007: third from last, only Mitsubishi and Land Rover had more issues per 100 vehicles.



That explains the primacy of quality in Strategy 2018, which we talked about in Part 1, and why the Sustainability Report says, "we consider customer satisfaction a crucial factor in our sustainable corporate success and have made it the core of our corporate Strategy 2018. That is the year by which we are aiming to rank among the three leading companies in all our markets. To measure our progress, we refer to the findings of two strategic studies: the New Car Buyer Study (NCBS) and the International Aftersales Customer Satisfaction Study (IACS). Our interim goal for 2012 is to be at least among the top five in all our markets."

That explains Michael Macht's presence at the proceedings. He was formerly the board member at Porsche responsible for quality. From 2005, when the Stuttgart brand was tied with VW in the 2005 J.D. Powers IQS way down in Davy Jones' Locker, the past three years Porsche has taken either first or second place.

It explains why Marc Trahan was brought over from Audi after 18 years and made the EVP of Group Service and Quality. His assessment is that "the basic engineering of our cars is pretty robust" – a VW will last a long time – but "where we need to improve is that last five percent that the customer sees and touches, like window switches." He didn't make excuses for outsourced parts, saying "our suppliers are ultimately our responsibility," yet he was certain that the care taken with the Passat would fulfill the promise of a VW.

There was "just a tremendous focus on detail, detail, detail – gaps, surface finish, degree of molding flash, [which] establishes the basis of the car, a sort of subconscious assessment. Open up the driver's door, take a look at the gap between the door and sill. It's three to four millimeters. Do that on any other car, you won't see that level of detail."

It explains why the plant's managers were flown to every other plant in the VW Group, and 200 experts from the group's other plants were flown in to advise on Chattanooga so that it could incorporate best practices from all ten brands. Fisher called it "a plant of short distances" because it's laid out in three arms that emerge from a central "backbone;" the body, assembly and paint lines each end at the center so that if there's a problem, the respective managers don't have to go far to provide a solution.

It explains why two cars are pulled off the line every night by the in-house quality team, one put through its paces, one given a sonogram and dismantled to check unseen items like welds. On top of that, a VW Group employee examines another car and sends his report straight to Wolfsburg, "for checks and balances."

It explains why "we've got a supervisor/worker ratio of one to four," according to Trahan. "It will expand once we stabilize efficiency and quality, training and the sharing of knowledge, but it's a new car, new plant, new process."

It explains why Browning said there's been a slow ramp-up in starting production, which gave board members time to visit the plant, assess the products and give feedback. "We're working with suppliers to understand VW process," he said. "It's a progressive development over a long period of time."

It explains why Tony Cervone said, "We're just not going to blatantly go after a million units – the result will be one million units. It's imperative we make the ownership experience really worthwhile."

Because everyone involved has to back up board-member Klinger's stance on the issue: "We are working extremely hard to understand the detail and executional issues that have tripped us up. I'm 100 percent unequivocal in saying this, there's been a sea change in the organization as far as attention to detail, not only quality, but how things have been done. Quality and reliability without any compromises, that is the target we're looking for."

And remember, "All is depending on the success of the Passat."


CAPACITY AND THE FUTURE

Or is it?

Even for the VW Group, a billion dollars isn't couch money. When Klingler answered the question about reaching 800,000 sales in the U.S., he finished it by saying "We have three hot cars [Passat, Jetta, Beetle] – why should we stop there?" After all the talk of huge exposure and local production benefits and financial imperatives we can't believe they'd blow that wad in the mere hope that, one day, they'd have a commercial reason to utilize the plant's 150,000-unit capacity. Nor can we believe that they'd settle for having just about one-fifth of their domestic target built in-market.

Of course, Volkswagen won't say what those products might be, but the suggestions were everywhere that there will definitely be something, with one exec saying "You can see where we have holes in the U.S. line-up and imagine what else there could be." Let the ruminating begin. Or rather, continue.



We not only wonder what VW is going to build here, but, as the brand is localized-yet-harmonized around the globe, we wonder how much more we'll get of what VW offers elsewhere – and we're not just talking about models (Scirocco anyone?), also technology. When we drove the Touareg Hybrid in Italy last year, the list of features we'd get here felt nearly as long as the ones we wouldn't: Lane Assist, ACC Automatic Distance Control with Front Assist Ambient Traffic Monitoring, drowsiness monitor, lighting and vision systems, Dynamic Light Assist, Area View camera system, and it went on. Those are Mercedes-like features – with Mercedes-like price tags – that VW's brand position simply can't support in America. Will an American factory and currency stability change that (and not upset Audi)?

It is clear that massive technology will be a major component of VW's push in all of its markets, if for no other reason than to meet the goals it publicly proclaims. The opening pages of the company's Experience D[r]iversity magazine read like the ominously benevolent sound bites of global corporations from sci-fi movies, the ones that have cures for every ailment: "There is no one single solution for environmentally friendly mobility. The prime success factor will be the ability to master the entire range of drives from both a technological and a business perspective," and "In our research laboratories around the globe, the mobility of tomorrow has already begun – and it is more intelligent, more diverse and more networked than ever before" are just two.

Flip over to the Sustainability Report and read that "The aim is to produce a fuel consumption leader in every class of vehicle." And this tech won't merely be advanced, it will be prolific, and electric: "In future, VW's heart will also beat with an electric pulse. According to our roadmap, the recently introduced Touareg Hybrid will be followed in 2012 by the Jetta Hybrid and, in the following year, by the E-Up!, just ahead of the Golf blue-e-motion. One of these models will also be the brand's first all-electric vehicle in the USA. VW will be the first manufacturer to offer an electric car that is accessible to every customer."



In that context, where VW can talk about "[mastering] the entire range of drives" and being the first to sell the cultural equivalent of an electric version of the original Beetle, it is unexpected to hear VW CEO Winterkorn say, in Experience D[r]iversity that "it is also important to respect our limitations. In the past, some frivolous promises were made regarding the availability of major technical developments such as series produced fuel cell vehicles in the near future. The same goes for battery technology. I think it is extremely likely that alternative drive systems will be able to compete with conventional ones. The question is when exactly this will be the case – and that's difficult to predict."

In fact, VW is making a lot of promises at the same time as it works harder to live up to and unlock the promise already there. Concerning Chattanooga, the promise was kept, down to the dollar. Whether it will be so faithful in the future, and how the assertions made today will be delivered upon in the metal, we all look forward to discovering.

For now, though, it's all about one plant and one car, and it won't take long to find out whether VW has entered the U.S.-market race at the pointy end, or if it has a lot more training and 'splaining to do. They're bullish on the odds, with a confident Michael Macht saying "Now more than ever VW has what it takes to win the hearts and minds of American customers."

That's a potent phrase to use; Americans have also spoken of winning hearts and minds on momentous occasions, and each time botched the job so badly that to say such a thing seems to invite catastrophe. We'll hope the Germans have a better grasp on how to make that happen.

And we hope the 2,000 workers at Chattanooga who are rebuilding the domestic future of the brand and providing sport for VW watchers have studied their Tupac. In case a refresher is needed, open your CD cases to disc two, track ten – the name of the album, and your theme song, is "All Eyez on Me."