FT.com / Companies / Europe - Germany's carmakers heading back to the future

FT.com / Companies / Europe - Germany's carmakers heading back to the future

By Richard Milne

Published: March 15 2007 02:00 | Last updated: March 15 2007 02:00

Back-to-the-future strategies are all the rage among German carmakers.

Leading the pack is Volkswagen. A presentation of its "new" strategy last week felt like a rolling back of the clock by a decade. Its focus on volumes with an emphasis on technology and quality - not a word about profitability and affordable cars - is a throwback to the days of Ferdinand Piëch as chief executive.

Little wonder that so many consider Mr Piëch, now the chairman, as the power behind the new boss, Martin Winterkorn. The cost-cutting era seems over at VW, a mass-market producer with a manufacturing presence in the wrong place - western Europe. With Peugeot-Citroën and Renault - to say nothing of Toyota and Hyundai - seeking to boost sales too, something must give.

Yet most other German carmakers are following suit. BMW is set to achieve its sales target of 1.4m cars this year. Such growth, however, comes at a price. In the US, BMW incentives have already reached a mouth-watering $4,000 a car.

Here lies the danger of a volume strategy - encouraging companies to take whatever steps are necessary to defend their positions, even at the cost of profitability. So it is hardly surprising that the world's most profitable carmaker, Porsche, continues to shun incentives. It suffered months of falling sales as its Cayenne SUV came to the end of its lifecycle because it refused to dump them on the market. Porsche says its sales will grow only lightly until a new model is introduced in 2009. Other carmakers should take note. richard.milne@ft.com

Copyright The Financial Times Limited 2007