Something very different is happening at the Volkswagen Group. It’s tinkering with its corporate structure in Germany and experimenting with a start-up effort to build electric SUVs and trucks in the U.S. This is highly unusual from a corporation that is as well known for its corporate bureaucracy as it is for its massive production volumes.
Change had to happen. VW has been in turmoil since Dieselgate disgraced the company and reportedly cost it over $30 billion in fines, legal costs and recalls. It’s now on its fourth CEO since 2015, with the latest boardroom revolt taking place only a couple of months ago. Its new lineup of battery-electric vehicles trail Tesla in sales and technology. And its “moon shot” software venture, called Cariad, pretty much blew up on the launch pad.
The Porsche IPO, which overnight made Porsche as valuable as the entire VW Group, may point one way forward. It unlocked tens of billions of euros in shareholder value and will provide many billions needed for BEV investments. An Audi IPO also could be quite valuable. Even Bentley and Lamborghini could be very enticing to investors. That’s why there’s talk that VW could turn itself into a true holding company, letting its many brands fend for themselves in a rapidly changing marketplace.
That also would untangle VW’s famous corporate bureaucracy, allowing each business unit to react far more quickly to its regional realities and marketplace needs. VW has caught a bad case of what the late, great Wall Street analyst Maryann Keller used to call “big company disease.”
But while the Porsche IPO captured all the headlines, I’m much more interested in VW’s effort to bring back the Scout brand in the U.S. market – this time as rugged electric SUVs and pickup trucks. It could provide greater “lessons learned” than the Porsche IPO. That’s because Scout is more than a new model line or brand name. It’s an entirely new company, actually a start-up.
The Scout Company was launched by seven executives from Volkswagen of America, led by CEO Scott Keogh. Even though the VW Group is bankrolling them to get started, they had to resign from their jobs at Volkswagen of America, giving up their company 401(k) savings plan, healthcare benefits and company-issued laptops. Now, they’re on their own.
Volkswagen only publicly announced the Scout program in May, but work on the project actually started a year before that. Even so, this small team already has accomplished a lot. It shows the advantage of using a small, commando-like, cross-functional team to get things done quickly. I hear the execs back in Wolfsburg are impressed so few people have gotten so much done.
They’ve already mapped out their branding ideas and marketing plans, and they have two fullsize, fully painted clay models of an SUV and a pickup truck.
While the Scout brand is not well known outside the U.S. and the original company went out of business in 1981, it turns out there is a fairly significant and passionate group of aficionados dedicated to restoring old Scouts. And a surprising number of Americans have fond memories of the brand, including people who were born well after the last Scout was built.
The team’s market research found the Scout brand scored higher in sentimental feelings than VW’s own ID.Buzz, that cool-looking BEV version of the old hippie van. From a brand awareness standpoint, Scout even outscored Rivian.
Now the seven entrepreneurs are working on taking their vision into production. They’ve already tossed out the idea of using VW’s MEB platform and will do a clean-sheet skateboard instead. They already decided to forgo using any VW assembly plant and will build their own or go with a contract manufacturer. By the end of next year, they expect to have several hundred people on the payroll. They may even do their own IPO.
They’re making bold moves, but to me the most amazing part is that this is even happening at all. This is very brave of VW. It’s a recognition that the old way of doing things won’t work in a world that is moving at Silicon Valley speed.
If VW can use IPOs to unleash its many brands and let them peer over the shoulder of the start-up Scout Company to learn how to be more entrepreneurial, it could spark a renaissance at Volkswagen. That’s a big “if.” It may not happen fast enough, and it will likely run into all kinds of unforeseen problems. But one thing’s for sure: Change has to happen. The way things are done now at VW is not working very well.
John McElroy (pictured above, left) is editorial director of Blue Sky Productions and producer of “Autoline Detroit” for WTVS-Channel 56, Detroit.