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Anti-UAW Workers Seek to Form Union at Volkswagen Plant


Employees at the Volkswagen AG auto plant in Chattanooga, Tennessee, are attempting to form a union that will include hourly and salaried workers as a counter to the United Auto Workers Local 42 established last month, a leading anti-UAW worker said on Tuesday, reported Reuters.

Mike Burton, who helped anti-UAW workers defeat the UAW’s effort to represent VW Chattanooga hourly workers six months ago, told Reuters he hopes the new union will force VW to hold another vote to determine which one is favored by hourly employees.

Burton said the proposed union local at Chattanooga will be the first chapter of what will be called the American Council of Employees. The new union will operate differently than the UAW, which he says hurts the competitiveness of unionized U.S. automakers.

Burton claims that since the February vote when the UAW lost by a 712-626 count, Volkswagen has drawn closer to that union, which is one of the main reasons he wants to create an alternative.

Burton said attorneys who helped him with an anti-UAW worker group called Southern Momentum during the February election at Chattanooga might help him with the ACE, but he did not elaborate.

Gary Casteel, secretary-treasurer of the UAW, told Reuters on Tuesday he does not see how Burton’s union stands much of a chance because VW and the UAW “have a consensus” that the company will recognize Local 42.

Casteel said it is up to VW whether it will recognize the new union if Burton is successful in creating one at the VW plant, which has about 1,500 hourly workers.

Casteel said Local 42 continues to gain support and now has “substantially more than 700 members, so there are not many workers left for the anti-union union to pick up.”

He would not say whether Local 42 has more than 750 members, which would be a majority of hourly workers.

The UAW normally faces stiff opposition from companies when it tries to organize workers, but is not being opposed by VW at the Chattanooga plant. The UAW wants to use this unique situation among non-unionized auto plants in the United States to establish a foothold among foreign-owned factories in the south of the country.

VW has often said it wants to have Chattanooga representation on its global works council. Works council representation is in place at every major VW plant in the world except Chattanooga. In order for the Chattanooga workers to have works council representation, they must first be represented by a U.S. union, most labor law experts say.

Burton said that he and co-workers collected 108 signatures on Monday for a petition supporting the ACE. He hopes to get enough signatures to show VW that his union has widespread support in the plant.

VW plant officials were not immediately available.

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VW Recalls 189,000 SUVs in North America for Potential Stalling


Volkswagen AG said on Saturday it is recalling 189,490 Tiguan small sport utility vehicles in North America for potential stalling issues, reported Reuters.

The German automaker said gas bubbles may form in the fuel system in the affected vehicles from model years 2009 through 2014 when winterized fuel with high vapor pressures is used in warmer areas or during months with higher temperatures.

That could lead to reduced fuel pump performance and pressure, potentially resulting in vehicle stalling and could lead to an accident.

VW said no accident or injuries related to the issue have been reported.

Dealers will install revised electronic control module software on all affected vehicles at no cost. The recall is expected to begin later this month, a spokeswoman said.

Of the affected vehicles, 151,389 were sold in the United States and 38,101 in Canada, a spokeswoman said. No other markets are affected by the recall, she said.

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VW Production Chief Leaves Amid Production Troubles


Volkswagen has replaced its production chief Michael Macht, who oversaw the introduction of a manufacturing platform which was designed to cut costs, a day after the company reported a drop in operating profit, reported Reuters.

VW is increasingly relying on its MQB modular platform, a production system introduced two years ago, to save money by using more common parts across its range of brands and models.

But the drive to produce a greater variety of cars is proving tricky, particularly at VW’s main Wolfsburg factory, leading to costly overtime and delays in production of its top-selling Golf model.

Macht’s resignation follows the publication of second-quarter results on Thursday which highlighted the growing troubles at the core VW brand, where operating profit plunged by over a third to 572 million euros.

Macht will leave VW with immediate effect after almost four years in the job, Volkswagen said. Macht, a former Porsche executive, became VW group production chief in October 2010.

“Michael Macht has furthered development of the VW production system,” Chief Executive Martin Winterkorn said in a statement. “We thank him for his achievement.”

Analysts have hailed MQB as the most important automotive initiative for years. The new platform features a far greater degree of flexibility and parts commonality than at Toyota, General Motors and other competitors.

“MQB is the central tool for VW to improve margins,” Hanover-based NordLB analyst Frank Schwope said. “They can’t allow any slippage here.”

VW has enjoyed a period of unprecedented growth, boosted by emerging-market buyers of its upmarket Audi brand. Its sales have risen more than a half to 9.7 million vehicles in 2013 compared with levels before the financial crisis, and it is set to hit a 10-million sales target in 2014 – four years early.

But the rapid expansion has led to a costly proliferation of models, especially at the VW brand. Winterkorn has now ordered a cost-cutting drive at the division with the goal of increasing savings to 5 billion euros per year from 2017.

Last month, Winterkorn had called on managers to step up their game to achieve a universal roll-out of MQB.

VW said Thomas Ulbrich, head of production at the carmaker’s main passenger-car brand, would take over duties from Macht on an interim basis until a successor is found.

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Leases Entice Drivers to Upgrade Cars as Often as IPhones


When Adam Gilgis leased a Volkswagen GTI this month, he had one goal: a low monthly payment, reported Bloomberg.

“We pay $320, which is perfect,” said the 35-year-old Chicago attorney. “If we finance the car, we’re paying thousands of dollars more over the course of several years.”

Auto leasing is back in a big way as automakers including Volkswagen AG and General Motors Co. pull back on discounts and rebates and entice Americans with ads promising cheap leases instead. So far this year, leases have accounted for about 27.7 percent of new-auto sales, according to Edmunds.com, the highest rate in years. Buyers like Gilgis shun long-term loans associated with outright purchases because increasingly they see cars as smartphone-like gadgets to be upgraded every few years.

“Like an iPhone, one can get a new vehicle with all the new technology and have a similar payment as before,” said Jessica Caldwell, an analyst for auto researcher Edmunds.com.

The recent surge in leasing is helping power U.S. auto sales, which are headed for the biggest year since 2007, when 16.15 million vehicles were sold. In June, five of the top six automakers beat analysts’ sales estimates. Lenders’ willingness to offer loans that stretch as long as eight years also is boosting sales. Terms of 73 to 84 months accounted for 24.9 percent of all sales in the first quarter, according to data from data services group Experian Automotive.

Once Tacky

Leasing was once considered tacky and financially frivolous, letting posers drive cars they could ill afford.

“Thirty years ago, if you rolled up next to someone riding in a BMW or a Porsche and you said ‘that car is leased,’ it was one of the biggest insults you could throw at someone,” said Mark Wakefield, a managing director at AlixPartners LLP. “Now, you’d say, ‘Yeah? So, what?’”

Attitudes began changing in the late-1990s, when mainstream buyers began leasing family sedans from Honda Motor Co. and Toyota Motor Corp. Now, with the economy improving and the financial crisis receding in the rear-view mirror, leasing is gaining traction once again. Automakers and banks are piling in because they’re betting that a robust used-car market means leased vehicles will hold their value after they’re returned. The higher the “residual value,” the less the car depreciates during the lease and the less consumers pay per month.

Drivers often weigh the cost of leasing versus taking out a loan and buying a car. With a 20-percent down payment on a Toyota Camry SE priced at $23,740, a 60-month loan costs an average of $341 per month compared with $207 for a 36-month lease, according to a TrueCar analysis.

Kia Sorento

Non-luxury buyers are leasing at a pace not seen since the late 1990s. Advertising consultant Drew Ament and his wife leased a Kia Sorento for $450 a month for 36 months in February.

“It’s good for me knowing that the lease gives her peace of mind,” said Ament, who lives in Phoenix. “I’m a guy who will get a car and then drive it until it’s dead. I have a Chevy Silverado right now that I’ll probably have until it’s done. My wife can’t do that. So, I pretty much give her a budget each month, and if it’s under that budget, then go for it. And she gets the most for her money.”

He’d rather not have a monthly payment, but considers it worthwhile to ensure his wife and children have a new vehicle that’s safe to drive.

“It’ll be nice maybe a couple leases from now to not have to lease a three-row SUV once the kids move out,” Ament said.

Auto leasing is a hotly debated topic. Consumer Reports has long said buyers are better off paying cash for a new car or taking out a short-term loan.

Hidden Fees

While leasing offers lower monthly payments and repair costs than buying new or used, Edmunds warns on its website that leasing vehicles is more expensive over the long run than buying a car and keeping it. The research firm also says lease contracts can be hard to understand and include hidden fees, including maintenance and damage charges. Simply exceeding the lease’s mileage limits, typically 12,000 miles per year, can cost a driver thousands of dollars.

Leasing also “puts you on a treadmill to buy a new car over and over every few years with no end in sight,” said Anthony Giorgianni, an associate editor at Consumer Reports. “Leasing is just a bad way to purchase a new car unless you’re a really wealthy individual and you just don’t care about costs. Otherwise, it’s smoke and mirrors.”

Jessica Caswell, communications manager at VSP Vision Care in Sacramento, California, said that when she leased a new Honda Civic she didn’t realize insurers often charge higher premiums and fees for leased vehicles.

Significant Sum

“It’s a significant amount of money, and you don’t really know about it when you sign the lease,” Caswell said.

She said she may buy the car once the lease is up.

Kevin Tynan, a Bloomberg Industries auto analyst, calls leases “the new incentive.” The question, he said, is how long can U.S. automakers rely on them to fuel sales.

Tynan said that when millions of previously leased vehicles end up on used car lots at cheap prices, it might make less sense for consumers to buy or lease a new vehicle.

“I think we’re about 36 months out from a period where pre-owned makes more economic sense for the average buyer,” he said. “New vehicle demand could flatten for a period beginning in 2017-18 as we work through all these off-lease autos.”

Long-term loans also could crimp sales because people don’t buy new cars when they are paying off the one they own. To ensure that doesn’t happen, dealers will have to get creative with their come-ons, said Larry Dominique, the president of TrueCar Inc., an online auto-buying service.

“It’s a bit easier with lessees since they tend to be customers who like new cars every couple of years, so you’d hope they’d be back,” he said. “But how can you build loyalty with those who buy their cars so that they’ll come back seven, eight years later? It’s challenging.”

One way to build loyalty is through giveaways and promotions, including free car washes, Dominique said.

“I’ve even gotten an offer to attend a free wine and hors d’oeuvres tasting at a dealership,” he said. “It’s coming up with things like that to engage customers that’s important.”

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Fiat Chrysler Denies Report of Merger Talks with VW


Fiat Chrysler has denied a magazine report saying it’s in merger talks with Volkswagen, while the German carmaker said it had no takeovers on its agenda, reported Reuters.

Germany’s Manager Magazin said on Thursday Volkswagen (VW) Chairman Ferdinand Piech had held talks with the owners of Fiat Chrysler about buying all or part of the group that was formed this year from the merger of Italian and U.S. carmakers.

The magazine cited unnamed company sources.

However, a VW spokesman said Europe’s biggest carmaker was focused on delivering improvements at its existing operations.

“There are currently no M&A (merger and acquisition) projects on the agenda,” he said. “We are now focusing on boosting efficiency across the group.”

The Agnelli family’s holding firm Exor, which owns a 30-percent stake in Fiat Chrysler, denied any talks had taken place, as did Fiat Chrysler.

Shares in Fiat Chrysler jumped 5 percent to 7.98 euros on the report, but had retreated to stand up 2.2 percent by 1352 GMT. VW’s stock was 1.8 percent lower.

VW Chief Executive Martin Winterkorn said in March the carmaker, though hoarding almost 18 billion euros ($24 billion) in cash, had no plans to expand the group through acquisitions as it was focusing on integrating its 12-brand network.

VW has since sealed a 6.7-billion euro buyout of minority shareholders at Swedish truck division Scania to forge a long-planned alliance of its truck brands.

The report could suggest “diverging views” between VW’s management and the supervisory board about the carmaker’s future course, said Arndt Ellinghorst, a London-based analyst at investment researchers ISI Group, at a time when Winterkorn, 67, and Piech, 77, are soon likely to face a debate over succession.

Rather than talking about further expansion, top managers at VW – concerned that profitability gains aren’t keeping pace with the company’s steadily-growing size – have been pushing a new efficiency programme that includes 5 billion euros of cost cuts per year at the core passenger-car brand.

Earlier this month, VW also denied a report it was planning a bid for U.S. truck maker Paccar next year.

INTERESTED IN ASSETS?

“The risks from integrating Italian plants and managing a U.S. business are material and we do not believe that the potential benefits justify the risks,” Ellinghorst wrote in a note to clients.

A person familiar with the situation told Reuters that VW would more likely bid for Fiat assets such as Magnetti or Alfa Romeo rather than the entire company.

A member of VW’s supervisory board, which oversees the management board, said the 20-member panel had at no point of time had any discussions about a purchase of Fiat.

Still, Piech and Winterkorn have repeatedly expressed interest in Alfa Romeo despite rebuttals from Fiat CEO Sergio Marchionne.

Manager Magazin said VW was hoping to use Chrysler’s U.S. distribution network to help solve its own problems in the world’s No. 2 auto market where flagging sales of the VW brand in January sparked the ouster of VW’s regional chief.

However, VW’s U.S. troubles “are more image and pricing problems and not so much problems of distribution and manufacturing,” an auto analyst said. “Buying Chrysler would not really help VW.”

Fiat took full control of Chrysler at the start of 2014, creating the world’s No.7 auto group, and plans to list the merged Fiat Chrysler Automobiles in New York later this year.

Chief Executive Sergio Marchionne has said he wants Fiat Chrysler to follow bigger rivals such as VW by building global brands and strengthening its position in the fast-growing and high-margin market for premium cars.

The company is counting on its founding merger and a U.S. listing to help foot the bill for its 48 billion-euro plan to grow net profit five-fold and sales by 60 percent by 2018.

While rumours of a potential Agnelli family exit have surfaced over the years in Italian press, Exor has repeatedly said the stake remained a strategic investment for the family.

Manager Magazin also said VW and Fiat Chrysler’s owners were far from reaching an agreement about a possible price.

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VW to Spend $900 Million at Tennessee Plant to Build New SUV


Volkswagen will spend $900 million to build a mid-sized SUV at its U.S. plant in Tennessee, nearly doubling the factory’s workforce, in an effort to revitalise sales in the world’s second-largest auto market, reported Reuters.

VW said on Monday it had chosen its factory in Chattanooga, Tennessee instead of a plant in Puebla, Mexico to produce a seven-passenger SUV starting in late 2016, creating up to 2,000 jobs at the site that currently has almost 2,500 staff.

VW’s $1 billion factory in Chattanooga started operating in 2011, building a cheaper, roomier version of the carmaker’s mid-sized Passat sedan specifically designed for American customers.

Wolfsburg-based VW became the world’s No. 2 auto manufacturer last year, only trailing Toyota Motor Corp thanks to sturdy sales growth in China.

But in the United States, sales of its core passenger-car brand have been flagging since a 2011-12 surge that followed a push into competitive mid-size vehicles. Sales of the VW brand in the United States fell 7 percent last year and 13 percent in the first half of 2014 ‎even as the overall market is growing.

“I admit that we may have dedicated too much time to China, Brazil and other states because the U.S. appeared to be working extremely well,” Chief Executive Martin Winterkorn said at a press conference in Wolfsburg. “That’s why we want to adjust things now.”

“The VW brand is going on the attack again in the U.S.,” Winterkorn said. “The United States will remain one of the most important markets for VW.” Troubles at the VW brand, which has been slow to refresh models and plug gaps in its U.S. lineup, led to a change in the carmaker’s North American leadership where Jonathan Browning quit as regional chief in January after about three years.

The new jobs at the Chattanooga factory will include about 200 positions in research and development and design to make sure the vehicles cater to the needs of the North American market.

“VW has lacked understanding of U.S. customers’ needs and market dynamics,” Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne, said. “They’re taking the right step. Success in the U.S. is a must for them.”

EXPANDED MODEL RANGE

Of the $900 million investment, $750 million will be spent on production of the new SUV and the remainder on infrastructure, a VW spokesman said. The state of Tennessee said it awarded almost $178 million in financial incentives to secure the investment.

VW officials said unit production of the SUV would be in the six-figure range. The vehicle will be sold in North America and other markets, and built on the same platform as the Passat. The Chattanooga plant built 130,000 Passat cars at its peak in 2011.

The overall mid-sized SUV market in the United States has grown to more than 1.4 million vehicles from about 750,000 in 2009, VW said.

Michael Horn, VW’s new U.S. chief, said at the press conference the carmaker would further expand its model range in the United States and has plans for more “derivative models.” He declined to elaborate.

The company will appoint a team of product management officials in the second half of this year at the automaker’s U.S. headquarters in Herndon, Virginia.

From 2014 to 2018, VW will invest more than $7 billion in the United States and Mexico. A 2007 goal to deliver 800,000 brand vehicles in the United States by 2018 – almost double last year’s total of 408,000 – is still realistic, Winterkorn said.

VW also said on Monday that Bernd Osterloh, chairman of the Groups Works Council of Volkswagen, would join the board for the automaker’s American operations to give its work force more of a voice in strategy planning.

U.S. Senator Bob Corker said in an interview the investment would not have happened without the UAW’s February loss.

“There’s no question the path that we followed was the only path that would have led us to this announcement,” said the Tennessee senator, a former Chattanooga mayor who helped first lure VW to the state.

However, UAW Secretary-Treasurer Gary Casteel said in a statement VW’s announcement coming four days after the American union’s plans to open a branch in Chattanooga “reinforces the consensus that the UAW has reached with the company.”

VW officials said the decision on the SUV was not related to the election loss in February by the United Auto Workers union. Some anti-union forces had said the loss cleared the way for the Tennessee plant to get the investment, while UAW officials said VW workers were improperly influenced by anti-union statements made by Tennessee Republican lawmakers and outside interest groups.

The UAW said last week that it had formed a local union in Tennessee for workers at the plant, taking another run at representing some of the employees. VW officials said they had no agreements in place with the UAW regarding its latest efforts.

VW officials have said they want the plant represented by some type of German-style works council, which typically includes both blue- and white-collar employees.

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