Page last updated at 07:40 GMT, Tuesday, 15 September 2009 08:40 UK

Volkswagen eyes global dominance

By Jorn Madslien
Business reporter, BBC News, Frankfurt

Volkswagen Group chief executive Martin Winterkorn addressing journalists at a briefing ahead of the Frankfurt motor show
Mr Winterkorn wants Volkswagen Group to become the world's largest carmaker

Presiding over the biggest show in town ahead of press day at the Frankfurt motor show, Martin Winterkorn moves with cocky confidence.

In front of an audience of more than 1,000 journalists at the Volkswagen event on Monday night, the firm's group chief executive leaps onto the stage to declare that "the Volkswagen Group can prove its immense potential here".

Mr Winterkorn is presiding over a string of model launches from the group's broad range of subsidiaries - ranging from truck-maker Scania and Volkswagen's commercial vehicles, via Seat, Skoda and Audi, to high-end brands such as Bentley, Bugatti and Lamborghini.

There is even a guest appearance from Porsche, the formerly proudly independent sports carmaker that itself had tried to buy Volkswagen Group, only to find itself being integrated as just another of its numerous car brands.

"Our group has not only the broadest product portfolio in the automotive industry, but also the best," Mr Winterkorn says.

Though rather than being just a display of diversity, this is a show of power.

Top spot

Mr Winterkorn is already in charge of Europe's biggest carmaker, Volkswagen Group, both in terms of sales, growth and market share. Yet he wants more.

We are going to continue to step on the gas to become a leader in the automotive industry by 2018
Martin Winterkorn, chief executive, Volkswagen Group

"We've done a lot better than the competition in this crisis," Mr Winterkorn says on the eve of the Frankfurt motor show, which kicks off as carmakers cautiously start searching for a way up from a downturn that has left the motor industry seriously shaken.

Volkswagen has seen its global market share soar from the single-digits to 11.7% so far this year, its sales slipping just 2.1% while the industry as a whole has suffered a 14% drop in sales, according to Mr Winterkorn.

Net profits fell, for sure, during the first half of this year, yet the group was still in the black, netting some 283m euros ($414m; £249m).

"We are going to cointinue to step on the gas to become a leader in the automotive industry by 2018," Mr Winterkorn vows.

And with that he is taking aim at both General Motors (GM) and Toyota, eager to shunt them out of the two top spots in terms of global sales.

Struggling giant

Late last year, when Mr Winterkorn first uttered the ambitious target, it seemed an impossible task. GM had yet to file for bankruptcy; Opel and Vauxhall remained integral to its business.

Wolfsburg City Mayor Rolf Schnellecke
You feel its pulse, the beating of its heart. If it is bad in the car industry it´s all bad
Wolfsburg City Mayor Rolf Schnellecke

Meanwhile, "Volkswagen sold 6.3 million vehicles globally in 2008, which remained a far cry from nearly 9 million vehicles sold by its Japanese rival Toyota", according to BMI Western Europe Automotive Insights.

Since then, GM has filed for bankruptcy in the US and announced the sale of a controlling stake in its Opel and Vauxhall division to Canadian car parts maker Magna.

Toyota, meanwhile, has seen sales plunge to a hoped for 7.3 million vehicles this year.

"We are aware that VW is increasing its share of the market, but in this market we are not concerned about our share in terms of number of cars sold," says Shigeru Hayakawa, managing officer, Toyota Motor Corporation.

"Instead, we are focusing on being number one in terms of customer satisfaction and quality."

Yet there is little doubt the formidable Japanese giant is struggling. New words seem to have entered the vocabulary of its executives as they plead for governments to do more for the motor industry once scrappage schemes in many countries come to an end.

"Natural demand will not recover until the second half of 2010," says Tadashi Arashima, president and chief executive of Toyota Motor Europe, during a briefing on Monday.

"So I think we will need some more help from governments to ensure a smooth transition."

Corporate town

No such talk at VW, and it is not simply a matter of unfounded cockiness.

Lamborghini car being unveiled
The Volkswagen Group includes Lamborghini

At the Volkswagen headquarters in Wolfsburg, the sheer scale of the enormous manufacturing facility is a clear hint at how the the group's might should not be underestimated.

A factory "the size of Gibraltar", in the words of Mr Winterkorn's communication officers, provides the foundation for this increasingly solid-looking automotive group.

Some 48,000 workers churn out about 3,200 cars per day here, in a city that is perhaps the closest you can get to a "corporate town" in Europe - and focus for the group's 360,000-strong global workforce across all marques.

A complex road network - the longest road inside the factory building itself is about 5.5 kilometres long - criss-crosses the 6.5 square kilometre plant.

Some 5,000 bicycles serve as transport as workers and managers whizz about, often narrowly avoiding collisions with fast-moving fork lift trucks or long trains taking tourists on guided tours from the adjacent Autostadt, a car distribution centre come funfair that attracts some two million visitors each year.

German election poster
The future of the car industry is a key election issue in Germany

Two power stations, both owned by Volkswagen, power the factory and the small city surrounding it; a city where locals go swimming in the VW Bad, and where they go to see the local football team, current Bundesliga champions VFL Wolfsburg, at the Volkswagen Stadium.

During a drive through the city to see Mayor Rolf Schnellecke, a minibus with Philharmonic Volkswagen Orchestra on the side joins the traffic from a quiet side street.

Some nine in 10 of the vehicles on the road here are either Volkswagens or cars from other marques within the group, whether Skoda, Seat or Audi.

"This is a special city," Mr Schnellecke says. "It was founded in 1938, only because of Volkswagen. Wolfsburg and Volkswagen are two sides of the same coin."

Wrecker or saviour?

In Germany, where elections are to be held later this month, Volkswagen's global ambitions will be closely scrutinised; the group's fate is widely seen as a barometer of the health of the German economy at large.

Hints that VW might acquire Japan's Suzuki to give it better access to India are met with cheers only rivalled by those heard when the Wolfsburg home team wins in football.

Volkswagen's factory
Volkswagen says its Wolfsburg factory is "as large as Gibraltar"

"The car industry is the leading industry, which is also the basis for industrial and engineering knowledge in Germany," says Mr Schnellecke.

"So the automotive industry is also at the forefront of politicians' minds.

"You feel its pulse, the beating of its heart. If it is bad in the car industry it´s all bad."

As such, the Frankfurt motor show takes on an economic and cultural importance that it is hard to imagine at other motor shows anywhere else in Europe.

Whatever happens here has the power to determine the lives of thousands of autoworkers, perhaps affect the outcome of national elections and, ultimately, wreck or save the world.

For beyond the corporate squabbling about who is in the lead, the overall message at the show is a uniform one from an industry that insists it is collectively searching for cleaner and greener solutions to global transport and pollution challenges - while at the same time being accused of "greenwash" and efforts to exaggerate rather meagre efforts when it comes to efficiency improvements and emission reductions.

It is an industry that is clearly a part of the problem, quite possibly part of the solution, and most certainly a sector where Mr Winterkorn is keen to take a lead.

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