business

Volkswagen Doesn't Want To Be Seen as a Detroit Automaker

Volkswagen is considering moving its headquarters from Auburn Hills, MI to California to be closer to the cultural action, and to be better able to recruit executive talent.

Given the hub-bub this is causing in Michigan, already decimated by white collar job loss from GM, Ford, and Chrysler, it’s worth a quick trip down memory lane about why VW’s headquarters is here at all when Mercedes-Benz and BMW are in New Jersey. Volvo was in NJ, too, until Ford moved it to California to be part of the Premier Auto Group. Porsche, which pretty much controls VW now, used to be in Connecticut, but now resides in Atlanta.

Indeed, while many Germans favor moving VW to California, New Jersey, Boston and Atlanta appear to be on the table as well.

Back in the early 1970s, former GM executive James McLernon ran VW of America, which was based in New Jersey with the other import car makers. VW was building a manufacturing plant in Westmoreland, PA and had a second plant on the drawing boards in Sterling Heights, MI. McLernon, and VW’s manufacturing chief Richard Dauch (later to be founder and CEO of American Axle) hated living and working in NJ. And to them, if VW was going to be a manufacturing entity, they needed to be amidst the supplier community in Detroit. So, so long to Englewood Cliffs, NJ and the New York skyline, and hello to Detroit and a view of the Ambassador Bridge to Canada.

Later, VW sold the Sterling Heights plant to Chrysler before it built a single car there. And it closed Westmoreland in the late 1980s. Ironically, now VW is talking again about building or buying a manufacturing plant in the U.S. And at the same time, it’s making a alot of noise about getting out of Motown where the supplier community is. If I had to guess where VW is scouting locations for a plant, I’d say Alabama, where several German suppliers are already located for Mercedes-Benz, or South Carolina where they are located to service BMW’s plant.

It’s difficult to say for sure if VW has suffered from being in Auburn Hills, MI. True, there isn’t much culture in the I-75 corridor. And I suppose there have been executives who said No to working at Volkswagen and Audi for reasons of geography. But former Mercedes exec Gerd Klaus moved from NJ to Detroit to run Volkswagen of America. Bill Young moved from LA to Detroit for the same job. Perhaps the best marketing exec VW ever had, Steve Wilhite, moved from California to Auburn Hills to take the job. Current Audi of America marketing chief Scott Keogh left NJ and NYC for Auburn Hills. But one of his predecessors, in fact, left Audi for California prematurely, stifling under the cultural stagnation of the Northern Detroit suburbs.

And, of course, there is the constant flow of visiting Germans. Not that VW AG home in Wolfsburg, Germany is any kind if cultural mecca. It’s about as interesting as Toledo, Ohio. What is amusing is how when you talk to some of VW’s German execs, they actually don’t understand that Detroit has a three-hour time difference with LA. I have even heard stories of German executives attending the LA Auto Show, when it ran back-to-back with Detroit’s, and trying to make make arrangements to drive from one show to the other until they found out it would take a week. But one wonders how much LA looms as a possibility for VW when there is a nine hour time difference between there and Germany, and the flights are five hours longer.

Nissan, of course, moved from LA to Nashville, TN in part because of how expensive it was becoming to have its headquarters in the most expensive area in the country.

I’m a skeptic that moving to LA or even New York City is a necessary move for a company like VW that is already losing a lot of money in the U.S. The real estate is far higher in both places than in Michigan. Perhaps it’s really a play to turn the headquarters personnel over. I believe that if people opt out of the move, it doesn’t cost VW nearly as much to reduce staff, or replace them. That’s the cynical view, of course.

Here is an idea. Move the headquarters and product development center to Ann Arbor,MI about 60 or so miles from Auburn Hills. The University of Michigan is here, as are product development centers for Toyota and Hyundai. The town, because of the University, has a global populace. The international University population gives you as good a window into cultural trends as any place in the world. I have never met the European or Asian executive who complained about his or her tour of duty in Ann Arbor the way I hear complaints about moving from, say, Germany or the U.K. to Dearborn, MI or Auburn Hills. And with Pfizer having recently left Ann Arbor, there is a nice set of buildings ready to move into.

Yes, I live in Ann Arbor, and it might help my real estate value a little. But really, it is my pitch to perhaps keep VW from making as big a mistake as they did 35 years ago moving out of NJ to Michigan.

Here’s a question. Are Honda and Toyota really successful in the U.S. because they are located in Califirnia? Perhaps VW would be interested to know that vehicles such as the Toyota Avalon, Tundra and Camry were developed in Ann Arbor. Are GM, Ford and Chrysler struggling because they are located in Detroit? I don’t think so.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE