VW Considers Moving Out of Detroit

Automaker, Along With Sibling Audi, May Relocate to East Coast

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DETROIT (AdAge.com) -- Already slammed by job losses due to cost cutting by the area's car companies and by their agency shifts, Detroit is facing another blow -- this time from Volkswagen of America and sibling Audi of America.
Susan Jacobs, president of consultant Jacobs & Associates, said a U.S. plant is a 'good step' for VW, because the automaker won't be as susceptible to currency swings.
Susan Jacobs, president of consultant Jacobs & Associates, said a U.S. plant is a 'good step' for VW, because the automaker won't be as susceptible to currency swings.

The automakers are considering a move of their North American headquarters out of Michigan, according to executives and managers familiar with the matter. The Detroit News reported that the relocation areas under consideration are the Washington D.C. region or North Carolina. But the executives and manager told Advertising Age the decision is contingent on whether VW also decides to start building vehicles in one of those locales -- which would mark the German automaker's first U.S. plant since 1988.

Execs sparked speculation
The automaker employs a total of some 900 people (including Audi) at its building in Auburn Hills, Mich., a VW spokesman said. He added the talk is mere speculation sparked several weeks ago by public comments from executives in Germany.

VW AG's CEO Martin Winterkorn told a German magazine if the U.S. dollar stays at current levels "one has to consider a factory in North America very seriously," Automotive News reported this month.

Yet word circulating inside VW's U.S. headquarters is that the plant and nearby headquarters' move is a done deal, and that only the top two levels of management would get relocation assistance, the executives and managers said.

VW of America's new President-CEO Stephen Jacoby, 49, starts his new job right after Labor Day. He was previously exec VP-global marketing and sales at the Volkswagen Group in Germany. Company executives in Wolfsburg headquarters were clear about his change-agent role when announcing his appointment in July, saying he "will restructure the automotive business in the USA in close coordination with the Group Board of Management [in Germany]."

A 'good step'
A U.S. plant is a "good step" for VW, because the automaker won't be as susceptible to currency swings, said Susan Jacobs, president of consultant Jacobs & Associates. She said German management must be careful about losing the brain trust of its U.S. team, however, which knows this market better than management in Wolfsburg.

The VW brand has had a rocky history in the U.S., moving from near death in the early 1990s to a revival with the Beetle's return in 1998 and then back into the barrel with its unsuccessful move upmarket. Audi, which also faced extinction here in the 1980s, is finally showing some resilience due to a product-led rebirth.

The company spokesman said the VW brand has said 2007 sales would be flat with 2006, when it sold 235,140 vehicles and Audi, which sold 90,116 last year, would be up slightly.

Relocations can be risky business. John Bulcroft, former marketing chief of Audi and Porsche, pointed to Nissan North America losing more than half its staffers in last year's move of its headquarters to Nashville, Tenn., from Gardena, Calif. He said VW also lost half its staff when it moved with its Audi and then-Porsche arm to Detroit from New Jersey in 1983. Still he thinks a move out of Detroit would make sense if it's to an area where the automaker has a strong market share.

VW "lost a lot of their best talent" in the move from New Jersey, said Fred Heiler, a former communications chief of Porsche and Audi who is now an industrial writer. "I've always felt VW never quite recovered from that."
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