If one were to chart the growth spurts of Volkswagen over the past three decades, the chart would look like a roller coaster. Plans were for former BMW boss Bernd Pischetsrieder to fix ailing VW when he came aboard in 2002. However, the best laid plans often go astray. VW’s share price is down almost 50% and profits fell by 36%. What is wrong at VW? First, VW has always been able to charge more for its cars because of quality, innovation, styling, and an implied lifetime guarantee. In recent years, however, consumers have decided that the company is going to have to come up with more value for the dollar if loyalty is to be retained. Second, sales in China’s booming market (VW was one of the first car makers on the scene in this giant economy) have plummeted and GM has driven VW from its number one ranking. Third, cost-cutting moves have not worked. Fourth, VW uncharacteristically has labor pains. The CEO has had little luck in reversing these problems because his consensus management techniques are having little impact on VW’s change-resistant bureaucracy. Over half of the company’s 100 managers are not used to making their own decisions. This spells even more trouble for the company in the year ahead.

1. Using a search engine of your own choosing, investigate Volkswagen’s performance over the past two years. Write a brief summary of their fortunes and misfortunes.

2. Visit the Volkswagen website at http://www.vw.com/corporate/. From information supplied, characterize the company’s existing structure.

3. Based on what you have observed in Steps 1 and 2 above, suggest a new organizational structure for the company. Cite any assumptions that you made when you developed your structure.

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