VW brand COO outlines his plans for Europe’s top automaker

November 20, 2018 12:44 CET

Volkswagen brand is readying the launches of a raft of new products in Europe including the new Golf and the T-Cross small SUV. Chief Operating Officer Ralf Brandstaetter outlined his priorities for the brand in an interview with Automotive News Europe Correspondent Christiaan Hetzner.

How would you describe your role as chief operating officer?

When Herbert Diess became head of both the brand and then the group, there was a concern that due to the broad range of topics he would face, certain things might fall through the cracks. It’s my job to guarantee that the daily business is running smoothly, so he can focus on developing and executing the group and brand strategy. I am steering the brand across and together with all departments so that we achieve our goals as fast as possible and fully exploit the synergies and full potential of the Volkswagen brand.

Do the other functional heads report to you or to Diess?

When it comes to daily operational issues, I have a cross-functional responsibility and operational lead with regard to the VW brand management board members. As COO I will not interfere in their specific fields.

How will you set your priorities?

Our departments are closely interlocked. Therefore, we need to work more closely than before across all areas. Our joint goal is to find the optimum solution in terms of continuously tapping new growth potential and improve our profitability while we achieve our one overarching goal — manufacturing great cars in as short a time as possible with the quality customers have come to expect from us.

What role do you play in VW Group’s Volume Brand Group, the new construct that includes Skoda and Seat along with the VW marque?

Each brand is represented by a CEO, CFO and strategy team in the committee. In the case of VW, I represent VW while Herbert Diess leads the group [as chairman].

What benefits does this new organization bring?

We want to achieve synergies not just within the brand but across the brand group. A good example of what the future will hold are the Skoda Karoq and Seat Ateca. Both are built in the same eastern European factory [in Mlada Boleslav, Czech Republic] using the same supply chain, so we can generate substantial synergies, yet for the customer they are totally different models. You also see this in Wolfsburg with the Seat Tarraco joining the VW Tiguan on the assembly line.

Ralf Brandstaetter: “We need to work more closely than before across all areas.”

What can we expect in 2019?

We are launching a raft of new products in Europe. The year starts with the T-Cross [small SUV]. It will be followed by the completely reworked Passat, which will have lots of new digital features. We will complete the year with the next generation of the Golf, which will set new standards. The Golf is in a class of its own, and I am sure the new generation will convince our customers of that again. Toward the end of the year production of the all-electric I.D. Neo begins and, last but not least, we will add an emotional model — the T-Roc SUV cabrio.

Ford is eliminating all passenger cars from its North American lineup. Does VW need to think more radically, too, when paring back its range?

We are on the right track with our U.S. product lineup. We have a completely new SUV range with the Atlas and Tiguan Allspace, which are tailor-made for the U.S. market. We also have the new Jetta, which is a pillar of the brand. We constantly review our worldwide model range in terms of profitability. We eliminated models that did not generate strong demand such as the Phaeton, Scirocco and Eos. This freed up resources to invest in the next generation of products such as our I.D. family. We believe our current pipeline is very promising.

How much longer do you expect the move to WLTP rules to affect your business in Europe?

Until the end of this year. By then we will have almost all models available again.

What are your expectations for diesel sales in 2019?

We believe the diesel will stabilize because it’s still the best solution for certain long-range drivers. The Euro 6 diesel we sell now is one of the cleanest on the market. The diesel is also making an important contribution to compliance with the stricter CO2 limits that start to take effect in 2020.

The UK will no longer be in the European Union after March 2019. How will Brexit affect your operations?

We are keeping a very close eye on developments and reviewing the entire spectrum of possible effects. It is clear that the UK is and will remain important for the Volkswagen Group as it is our second-largest market in Europe. It is also an important production and investment location through the VW Group’s British brand, Bentley.

One of the three pillars of the VW brand’s turnaround plan focuses on your western German plants. Under the Future Pact you are targeting 3 billion euros in cost cuts, a net reduction of 14,000 jobs and a 25 percent productivity gain in the four years through 2020. Now that you are half way through, are you on course to achieve these targets?

Yes, we are on track to deliver. Our full-year forecast for 2018 shows that we will achieve 2.2 billion euros of cost savings. Since the start of this program we have already reduced our headcount in Germany by more than 5,000 and more than 9,300 people have signed early retirement contracts and will leave the company by 2020. Even more important, we have created more than 1,500 new jobs in future-orientated business areas such as software development, connectivity and new mobility solutions. Together with the works council we will achieve our Future Pact goals on time.

VW brand aims to save 2.6 billion euros in manufacturing by 2025 by boosting productivity 30 percent in all factories worldwide when compared with 2018. Does this now mean more job cuts are coming?

Right from the start of the product development process, production must define the framework conditions and requirements. This rules out late modifications to fully developed vehicles, which have cost us a lot of time and money in the past. The reduction of complexity and stable processes are important levers to increasing productivity at our factories. A good example is the Golf. In 2018 we have [so far]sold about 84,000 Golfs in Germany of which more than 58,000 had a different configuration. Fewer than 400 models were identical. A reduction of this complexity through intelligent bundling of configuration packages has many advantages. One is that production requires less logistics space and therefore optimizes the management of our supply chain. In the end, the customer benefits because the order process is less complex and it enables us to reduce the lead time to the customer.

Does purchasing have a similar cost-cutting objective in the midterm?

When it comes to optimizing our business, we seek close contact with our partners to combine efforts. Every year we have efficiency requirements that we discuss closely with our suppliers to identify savings that might derive from, for example, new production processes such as Industry 4.0.

Meet the COO

NAME: Ralf Brandstaetter
TITLE: VW brand Chief Operating Officer
AGE: 50
MAIN CHALLENGE: Moving VW brand into the electric era starting in 2019 with the battery-driven I.D. Neo.

Another key part of the VW restructuring plan is a turnaround in the key markets. How are you progressing?

In Brazil we finally have a rejuvenated lineup. That, combined with restructuring measures, productivity gains and a high local content, has improved our margin.

With your sales volumes rising in a stagnant U.S. market, could you be profitable there next year, which would be a year ahead of plan?

The important thing is that we head in the right direction, making significant improvements with new products tailored to the needs of U.S. consumers. More [such products] are on the way with the Atlas Cross Sport five-seat SUV that will be built next year in Chattanooga and the upcoming Volkswagen SUV.

So we can expect a 6 percent margin at the VW brand overall by 2020?

We have enough potential that we can leverage, whether in terms of productivity or reducing complexity by eliminating variants. We need to work hard and first of all give the market a guidance for 2019. Beyond that, we are committed to our long-term targets.

As the brand’s purchasing chief, what project has been at the top of your list?

For the past three years I have been intensively involved in the development of our MEB architecture for the I.D. family of electric vehicles, including all the new components specific to the high-voltage systems we need to procure. Capacity for all e-specific parts wasn’t there so we had to build up the entire supply chain.

Since the day only has 24 hours, would it not make sense to pass on the reins to a successor and focus solely on your COO role going forward?

At the moment this is not a topic that is under discussion. Over the past three years I have established processes and assembled a team with a broad range of experience, on whom I can rely on to a great degree. That allows me to focus more intensively on the brand. Stefan Sommer joined the VW Group management board in September. He will focus on strategic make-or-buy decisions. With him we have brought on board an additional purchasing and components expert.

You have been running VW brand’s purchasing activities since 2015. Perhaps it comes with the territory when you work in such a highly sensitive area of the business, but you are still largely unknown to the public. What attracted you to this field? Clearly not the limelight.

Going all the way back to my time as a factory mechanics apprentice, I always liked being in operations. So it was natural that I focused on production technology during my industrial engineering studies. After graduation I returned to Volkswagen, where I started in purchasing, learning on the job from the ground up.

What was your first big assignment?

After holding various roles in the purchasing department and at the General Secretary department I joint Seat in Spain as the management board member responsible for purchasing. I have had the fortune of learning from real experts in the field. Herbert Diess is another great example: He served as BMW’s procurement boss for several years.

What was one of your first big challenges?

It came while I was Seat’s purchasing chief. I had a lot of overarching responsibilities during my three years on the board. Our job was to restructure the company to become more efficient. It was a difficult time. We had to let go of a lot of employees in the process, but together we accomplished a lot to make Seat more competitive.

What kept you busy in recent years

During that last few years, my focus has been on creating a competitive supply network for our e-mobility strategy and the MEB architecture. The challenge was to set up a competitive cost structure by taking advantage of the scale effects of the group. We are striving to make e-mobility affordable for everyone and keep the promise of our brands name — Volkswagen, the people’s car.

AUTOMOTIVE NEWS EUROPE TALK FROM THE TOP SPECIAL

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You can reach Christiaan Hetzner at christiaan.hetzner@gmail.com.

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