Volkswagen of America

COMPANY BACKGROUND

Volkswagen of America is the U.S. subsidiary of the Volkswagen automobile company in Germany. Formed in April 1955 in Englewood Cliffs, New Jersey to standardize dealership service in the United States, it grew to 909 Volkswagen dealers in the United States by 1965 under the leadership of Dr. Carl Hahn. Under him and his successor as president of Volkswagen of America, J. Stuart Perkins, VW's U.S. sales grew to 569,696 cars in 1970, an all-time peak, when Volkswagen captured 7 percent of the U.S. car market and had over a thousand U.S. dealerships. The Volkswagen Beetle was the company's best seller in the United States by a wide margin.

Ferdinand Porsche designed the Volkswagen automobiles during the 1930 in Germany. The original vehicles, targeted at the mass market. Were intended to transport a family of five at highway speeds, use modest amount of fuel, and remain within financial reach for most people. The company’s signature platform by the late 1940s was the Beetle, which with its rounded styling and reliable air-cooled engine, became internationally popular. For about 20 years, sales of the Beetle hurtled skyward, propelling the company’s total worldwide vehicle sales past a million in 1955 and to high point in 1969. Although popularity of the Beetle declined throughout in the 1970s and its importation was discontinued in the U.S late in that decade, production of Beetles in Latin America continued in the U.S late in that decade, production of Beetle in Latin America continued into the 1990s. It remains the best selling car of all time.

After peeking in the late 1960s, the pattern of sales for the North American subsidiary of Volkswagen settled into a trying cycle ups and downs that became known, due to its jagged contours, as the “Himalayan Chart”. Sales fell precipitously until the introduction of the Rabbits in 1977, then recovered briefly before dropping sharply again. This time the introduction of the Jetta prompted another short lived recovery, followed by several year descents to a new low point in the early 1990s known informally within the company as the “Valley of Despair”.

PROBLEM

1. How Volkswagen of America handle the schedule and cost overruns of IT projects?

2. How does the Next Round Growth (NRG) program support the business strategy that Volkswagen of America has?

3. How the Digital Business Council communicates to each of the business unit the criteria used to approve a project so that there are no misleading perceptions?

PROBLEM ANALYSIS

Managing IT

Between 1992 through 2002, turning the VW and Audi brands around in the U.S. market were the main focus of the executives of Volkswagen of America (VWoA). Marketing and selling activities were the funding priority. At the time, Information technology was considered a source of overhead. The executives minimize the expenses of its internal IT so that all available funds could be used to run the company’s other important needs.

In 1992, VWoA entered into a 10-year agreement with Perot Systems, an IT services provider, in order to reduce short-term IT costs. Perot’s responsibilities are for the maintenance, repair, and operation of the IT production environment.

In 1999, gedasUSA Inc, a new Volkswagen AG (VWAG) Group company was created in the United States. The responsibilities of GedasUSA are for administering the outsourcing contract with Perot Systems and would assume responsibility for IT operations at the expiration of the Perot contract in 2002. Also in this year, VWoA set up “eBusiness teams”. The purpose of this team is to create digital marketing assets and interact with customers in new ways.

During the five years from 1999 through 2002, to rebuild the IT environment in order to support the now rapidly growing VW and Audi brands, gedasUSA, Perot Systems, and the VWoA eBusiness teams worked together. From time to time, it became increasingly clear that the IT function was not performing optimally within VWoA. Responsibility for managing IT was shared among multiple providers with no single organizational entity in control of the overall process. Furthermore, the business units within VWoA were increasingly concerned that IT expenses were on the rise and that IT projects seemed to be plagued with schedule and cost overruns.

In 2002, the ELT decided that a new business unit was required within VWoA that could become the single point of governance for all IT issues. That new organization would consolidate the technical elements of the eBusiness teams and act as a point of contact for gedasUSA, which would in turn act as VWoA’s