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Posts Tagged ‘multinationals’

Volkswagen to make U.S. push

October 5th, 2010 Comments off

The Wall Street Journal today has an excellent front-page article documenting some missteps made by Volkswagen in the United States market that has resulted in VW claiming a paltry 2.2% market share along with plans to turn that around in an effort to become the world’s largest automaker by the end of the decade. One of the ideas being implemented is designing, for the first time, a car to specifically meet American tastes rather than selling what works in Europe in North America in nearly identical form.  This is interesting to me because I’ve read elsewhere that Ford is taking the opposite approach trying to produce car models that are virtually identical no matter where in the world they are sold.  VW also risks, in the process, alienating the small but devoted following that it currently has.

“A lot of people worry that we are going to start making VWs for the masses,” says Mark Barnes, VW’s U.S. chief operating officer. “I like to say we’re going to bring the masses to VW.”

The retooled compact sedan marks the first time VW engineers have designed a model specifically for the U.S.

Next year, a new family-size sedan is scheduled to roll off the assembly lines at a newly built $1 billion plant in Chattanooga, Tenn. It is VW’s first U.S.-made car since the 1980s. On its heels comes a revamped New Beetle.

“I am fully aware that Volkswagen was too cautious for too long in North America,” Volkswagen Chief Executive Martin Winterkorn said at a test-driving event for the new Jetta in San Francisco this summer. His remark was a nod to the car maker’s decades-long penchant for deploying cars designed for European tastes across the Atlantic. That left its U.S. operations with models too small and expensive to go head-to-head with Asian and American rivals. Now, he vowed, “we have turned that upside down.”

Adding to the challenge is the constant change at the top in VW’s American operations:

Adding to the challenge is an unanticipated switch at the helm of VW’s U.S. operations.

In June, Stefan Jacoby, a blunt-spoken German who took to wearing cowboy boots to dealer meetings and car shows, left his post as U.S. chief to become Volvo Cars’ new chief executive. His departure came just a week after he presented the new Jetta at a splashy launch party in Manhattan’s Times Square featuring pop singer Katy Perry. VW bosses scrambled much of the summer to fill the void left by a key architect of its American comeback strategy.

Mr. Jacoby’s replacement, former General Motors executive Jonathan Browning, is new to the U.S. market, having spent most of his career at GM’s European operations and managing Jaguar under Ford Motor Co.

Some U.S. dealers complain that the revolving door of U.S. chiefs—Mr. Jacoby was the third to go in five years—reflects a culture at VW’s headquarters in Wolfsburg, Germany, that views the U.S. as a career way station, or worse, graveyard.

Assuming that the leadership and design challenges can be met, there is still the issue of getting Americans to notice.  Marketing has been ramped up to target certain demographics such as Hispanics and families, but the results thus far appear to be mixed.  Before reading this article, I didn’t even know that Volkswagen offered a minivan even though my family purchased a Toyota Sienna less than a year ago. In an interesting partnership with Chrysler, VW rabadges the American van as it’s own with some minor tweaks but production had to be halted due to low sales.

After dropping plans for a modern version of its Microbus for fear it would be too niche and costly, it signed a deal with Chrysler to modify and rebrand the U.S. car maker’s Town & Country minivan under the VW Routan name. VW tightened the minivan’s suspension, gave it a sleeker front end and kept it in the same price range as the Chrysler. With an ad blitz featuring Brooke Shields, it aimed to capture 5%, or 45,000, of the 700,000 annual minivan market.

But the Routan’s launch coincided with the auto industry’s nose dive in late 2008. So many of them sat unsold on VW dealer lots last year that the auto maker asked Chrysler, which builds them at its Windsor, Ontario, plant, to temporarily halt production. While much of the rest of the minivan market has rebounded, Routan sales have slipped 0.8% to 12,539 vans so far this year, one-seventh of the number of Town & Country sales in the same period.

VW officials argue that the Routan has enabled them to sell to a key new customer segment. The company still expects the Routan’s market share to grow as more consumers become aware of it as a minivan option.

But Casey Gunther, VW’s top-selling U.S. dealer, says the Routan isn’t what people expect from VW.

“It’s like someone trying to sell you a piece of chicken and claiming it was a steak,” Mr. Gunther says.

VW, he argues, could achieve its 800,000 sales target, “but we need to elevate the brand with products that play up our heritage,” such as the Microbus concept or VW’s sporty Scirocco, which it sells only in Europe. “There are so many people out there who love the lifestyle VW represents,” Mr. Gunther says. “I’m worried we’ve turned into a follower and not the leader.”

There are countless other great examples in this article that address things we discuss in class like strategy, international competition, product design, and more.  It is not a short piece, but is well worth the read when you have 10-15 minutes.  Seeing where things are at in 2, 5, or 10 years will be even more interesting.

Volkswagen Aims At Fast Lane in U.S.. Vanessa Fuhrmans. Wall Street Journal. (Eastern edition). New York, N.Y.: Oct 5, 2010. pg. A.1

Starbucks at loggerheads with the taxman

August 9th, 2010 Comments off

Starbucks is getting some press today as a company that is having to justify transfer pricing.  As I’ve mentioned several times on this blog as well as in class, the tax authorities around the globe are increasingly starved for revenue and this type of thing, founded or not, is sure to continue.  There is just too much wiggle room for companies to use transfer pricing methods to escape taxes and in so many cases without an external market it can be impossible to defend a particular price regardless of how vaild/realistic it might be.

In a note to its annual British accounts for the year ending September 27, 2009, Starbucks said: “The company is in discussion with HM Revenue & Customs regarding its transfer pricing policy.”

Read more at:

Starbucks at loggerheads with the taxman – Accountancy Age.

GE Finds Rougher Sledding in China – WSJ.com

July 18th, 2010 Comments off

General Electric is about as big as multinationals come and this article gives some examples of issue even a large company can have implementing strategy worldwide.

Chinese wind-turbine makers such as Sinovel Wind, Xinjiang Goldwind Science & Technology and Dongfang Electric — buoyed by China’s national spending on wind energy — grew rapidly, stealing share from world leaders such as Denmark’s Vestas Wind Systems A/S and GE, and now rank among the top 10 wind turbine producers globally. In April, China Commercial Aircraft Co., or Comac, selected Hamilton Sundstrand, a subsidiary of United Technologies Corp., to supply the $1 billion worth of electric power generation and distribution systems for a proposed jet plane instead of GE and other bidders.

GE’s Road In China Is Getting Bumpier. Paul Glader, Shai Oster. Wall Street Journal. (Eastern edition). New York, N.Y.: Jul 9, 2010. pg. B.1

Sony Rebounding But Concerned About Currency Exchange Rates

May 18th, 2010 Comments off

While researching the post I made earlier about Nintendo, I ran across a related Wall Street Journal article about Sony.  Sony has had a tough couple years like a lot of companies have but they are looking toward a brighter future as cost-cutting efforts begin to pay off and new products are introduced. The part of the article that really caught my eye, though, was a paragraph that looked at the exposure Sony has to the currency markets as a Japanese company selling goods worldwide (emphasis added):

Sony said the yen’s recent strength is also a concern. The company is projecting the U.S. dollar to trade at an average rate of 90 yen and the euro at 125 yen for the fiscal year. For every one yen that the euro falls, Sony’s annual operating income takes a 7 billion yen hit, while a one yen drop in the dollar will result in a 2 billion yen decrease in operating income. As of Thursday evening in Tokyo, the euro was trading around 117 yen and the dollar around 93 yen.

There are ways that Sony can hedge itself against large Euro/Yen and Dollar/Yen swings, but these hedging mechanisms are not perfect and given Sony’s size it may be difficult to adequately hedge such a large position (Sony would be dependent on other players taking the opposite side of those trades).

Corporate News: Sony Is Upbeat Despite Loss — Company Expects to Swing Back to Profit, but Currency Rates Are Problematic. Daisuke Wakabayashi. Wall Street Journal. (Eastern edition). New York, N.Y.: May 14, 2010. pg. B.2

McDonald’s to Move European Headquarters

July 13th, 2009 Comments off

Following some other companies including Kraft and Yahoo!, McDonald’s has announced that they will move their European headquarters to Switzerland.  The McDonald’s spokesman denies that the move is for tax reasons, but other firms have been quite vocal that high taxes in the U.K. and elsewhere compared to the lower tax rates in Switzerland have been behind their moves.

Some homegrown companies have also been making the same switch. While the U.S. companies have usually been discrete about their complaints about high U.K. taxes, the homegrown companies that move out of the U.K. to Switzerland or sometimes Ireland have been more vocal in saying high taxes have been the reason for the move.

We’ll discuss multinational issues including tax rate discrepancies in Chapter 23 when we discuss transfer pricing.  With more companies operating in multiple countries the practice of choosing to locate in tax-favorable locations is sure to increase.  The same thing happens, by the way, when states in the USA raise their taxes too much in comparison to neighbors or even distant states.

McDonald’s Base in Europe Shifts to Switzerland. Martina Cruz Riquet.  Wall Street Journal.  July 13, 2009.

Language & Culture in Mulitnational Organizations

June 16th, 2009 Comments off

The link below is to a lengthy piece about native and non-native English speakers working together globally within organizations where English has been mandated as the “lingua franca” either formally or informally.  Reading the whole analysis is probably overkill as far as how it relates to our course, but the example of the role organizational culture (and cultures of different geographic regions too I suppose) plays in the process of sharing information/knowledge, even among those that want to share this information, is interesting.

We can draw similar parallels in our classroom environment given the high percentage of students that do not speak English as their first language.  This class is hard enough, but throw in a language barrier and it is truly admirable the effort and performance exhibited by so many that could very easily choose to give up instead.  Congratulations to those of for whom English is not your first language — perhaps the attached study will give us all some insight into the kinds of choices we can make to make the communication barrier lower for everyone.

Walking Through Jelly: Language Proficiency, Emotions, and Disrupted Collaboration in Global Work. By Tsedal Beyene, Pamela J. Hinds, and Catherine Durnell Cramton. Harvard Business School, 2009.

Transfer Pricing Audits on the Rise

April 15th, 2009 Comments off

Here are a trio of related pieces about the increase in governmental audits of multinational companies related to transfer pricing practices.  While this may be bad news to the companies that have to deal with more aggressive auditors and/or the resultant fines/penalties, it could be great news for the accounting profession and any of you that want to make a career of these kinds of things.

http://www.accountancyage.com/accountancyage/news/2240138/transferpricing
http://blog.aefeldman.com/2009/04/14/transfer-pricing-audits-increasing-talent-in-demand/
http://www.theinquirer.net/inquirer/news/679/1051679/intel-accused-massive-tax-evasion