Volkswagen Change of Organization Structure

April 2018:  “Management may be overextended by too many products in one organization”. That’s theory. The supervisory board of Volkswagen found that’s the case and decided to change the all over organization. Three divisions – or product lines – were established in car business:

1 – Volume (mass production cars), including VW, Skoda, Seat

2 – Premium (higher value cars), that is Audi

3 – Super Premium (luxury cars) with Porsche and Bentley

The product line organization for these three divisions determine to a large part the production processes. The division of labor in these three divisions presumably will be quite different, due to the different annual production amount. More or less workplaces in one production process will have an impact on the workplaces and especially on its tools. So manufacturing and assembling the cars might be quite different in each division . The tools within each division in the various local production processes however will resemble each other. To a certain degree they will be alike in the division Volume but different in Premium or in luxury cars. – If in practice this is not fully true, it is due to the minimum cycle time of ca. 1 min, that is the time needed for combining body and motor in an assembly line.

As central services organizational units will stay in operation in headquarter. They will deliver services for all divisions and sub-divisions: human resources, research & development, IT, vehicle-related IT, group sales, group production and group procurement. Practical problems will arise to determine what tasks are central and what tasks are division-special. (These decisions sometimes tend to be political.) The general trend for reorganizing VW-Corporation however seems to be sensible.

Another general problem in product line organizations pose the sales activities. How many of the sales activities are to be central and how many are to be put to the product lines?

The Volkswagen supervisory board decided to place the regional responsibilities to defined sub divisions: North and South America and Sub Sahara will be handled by the subdivision VW, North Africa by Seat, Russia and India by Skoda, Near East and Asia-Pacific by Audi. That however is a delicate construction that sometimes causes problems, it assumes all decisions will be neutral in regard to the other divisions or subdivisions.

A unit China is separate, it will be operated in the headquarter – maybe a first step to a more or less customer organization which might follow some day.

The truck and bus unit, with the new name Traton, is not part of the core VW-business, e. g. the customers of trucks are probably very different from the customers of cars. Traton will be spun off and become a new stock company. (The insider complaints about a very long VW decision processes thus will be past). Traton will include primarily MAN and Scania. The merger of MAN and Scania makes sense, they manufacture at about the same level in the production processes, an “economy of scale-effect” can be expected.

And since the motorcycle company Ducati too is not part of Volkswagen core business in the more or less long run it might be sold.

P.S.: These considerations are based on public information in the media. They are to illustrate theoretical findings. If the used assumptions prove to be different, different conclusions might be logical.