A Further Integration of the American and German Automotive Industry -- Joining Forces to Fend off the Japanese

The first major step in the efforts of American and German car companies seeking a joint defense to the Japanese automotive juggernaut came with the historic merger 8 years ago between Daimler Benz and Chrysler.   Daimler brought German engineering and discipline to Detroit's perennial number 3 car maker and eventually, as so often happens when a "merger of equals" meets the reality of cultural integration, an entirely new management team with allegiance to the German parent.

A second step is now in the offing, except that this one involves the export of American management techniques to Europe's largest car company, Volkswagen AG.   The imposition of this less continental style of running a company comes courtesy of the relatively new head of the flagship Volkswagen brand, Wolfgang Bernhard, as profiled in a story in today's Wall Street Journal entitled "Top Volkswagen Executive Tries U.S.-style Turnaround Tactics."    Although Mr. Bernhard is German, he received his MBA from Columbia University and cut his teeth in business with McKinsey & Co.   He was instrumental in instilling the Daimler way at Chrysler before jumping ship to join VW.

Besides cross fertilizing production expertise and facilitating problem solving teams made up of empowered employees, one of the moves that turned heads was Mr. Bernhard's initiative to bring American quality control experts into VW's plants to improve the company's lagging record on the consistency and dependability of its vehicles.   This in itself says something about the pecking order for quality in the auto industry as among the Japanese, Americans and Europeans.

Another "American style" management ploy engaged in by Mr. Bernhard was obtaining union cost concessions on a new vehicle platform by threatening to outsource production to one of its plants outside of Germany -- in Portugal.  Of course if one buys fully into the notion that the European Union is an integrated and unified market which competes with the U.S. on equivalent terms, this wouldn't be outsourcing anymore than it would be for Ford to move production from say Kentucky to New Jersey -- but that's another story.

Perhaps the final and ultimate irony in all this is the financial reality that has caused VW to import from the U.S. what some European observers see as radical management tactics in the first place -- namely that while the company posted a net profit from its global operations in excess of $1 billion for 2005 on nearly $30 billion in sales, it  lost over $1 billion in North America.    At least when it comes to the automobile industry, my sense is that both Americans and Europeans would do well to focus on Toyota as a source of management ideas.