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Lethbridge Herald Newspaper Archives

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Lethbridge Herald, The (Newspaper) - May 11, 1974, Lethbridge, Alberta May 1174 THE LETHBRIDQf HERALD-39 Problems force Volkswagen into a corner A two-part series By CHARLES E. DOLE Christian Science Monitor Germany the company that put the beetle on the road map of the is in big trouble. Worldwide militant labor continuing attacks on the automobile as destructive to the environment and rising fuel prices and higher insurance material shortages in shipping and steeply rising freight compound to force VW into a corner. The biggest jolt of all is the erosion of the dollar vis-a-vis the West German mark. Decline of the dollar brought us to the limit of competitiveness abroad as far as price is declares Horst a member of VW's board of management in Wolfsburg. Volkswagen sales worldwide are down an average 20 percent from the same time a year ago. In sales were down 15 percent in Germany and 25 percent in the rest of Western Europe. In the United sales were down a drastic 30 percent. In Volkswagen stock is scraping the bottom of the ledger. Beetle have risen in the U.S. from less than a few years ago to close to The VW a front-wheel-drive vehicle introduced earlier this year in the sells for well over far more than many cars which come from Detroit. Revaluation of the dollar in has affected some two-thirds of the company's total sales. One-third of all VWs are sold in West another third go to the rest of and a final third are shipped to North America. To help counter the drop-off in assembly workers were on furlough from April 22 to May although they are paid about 60 percent of their wages. An earlier layoff affected the VW van facilities. Total VW employment is down by at least from what it was a few years about foreign workers are still on the payroll but not including Audi. In the non- German workers are from Italy and Tunisia. Compounding VW's problem is the dual control under which the company operates. there is a 21-member supervisory board of a majority of whom are oriented toward the ruling Social Democratic Party in West both in the Federal Republic as well as in the state of Lower Saxony in which the Wolfsburg headquarters is located. Then there is a nine-member board of management headed up by Rudolph Leiding. The lines of responsibility are carefully and the supervisory board of directors has effective control in areas such as investments and personnel The directors also lay down the general lines of business policy and appoint the members of the board of management. No one has control of Volkswagen's stock. Broken about 60 percent of all stock is in public hands. The local government in Bonn owns 16 percent and the Volkswagen Foundation has 4 percent. Eleven members of the supervisory board of directors are oriented toward the Social which favor the unions. Eight of the 11 members are from the unions. The supervisory board has a major impact on company management decisions and shares the responsibility with the board of headed by Dr. Leiding. Elections are scheduled in the state of Lower Saxony for June If the Christian Democrats get a this would result in the ouster of two members of the supervisory board of which in change the political balance of power on the board. It could also result in long-term changes on the board of management as well. it could result in future decisions which are less union-oriented than under the present setup. Leading the attack on the company at home are militant which keep up the cost pressure on VW by heightening their demands almost to the breaking point. The trade for forced VW into sizable pay raises at a time when the company is reeling from cost pressures on all sides. In February VW granted an 11 percent wage increase to avoid a threatened strike by the auto workers. Union leaders had been asking for considerably more. Next fall they will get another two percent hike. In Mr. chairman of the board of wrote a letter several weeks ago to all Volkswagen workers. in Germany warning them that the company was being forced into a pit and that it could no longer submit to further worker demands. The unions continue to demand more concessions. They charge that the VW management has spent huge sums in areas that did nothing to help out the such as buying the NSU-Auto Union combine and building new plant facilities. In the VW parent excluding its subsidiaries in Brazil. and South earned 110 million or less than a 1 per cent return on capital. The shift in control a few years ago from Dr. Heinz who brought the ugly out of the ashes of the Second World War into a startling postwar industrial was His Kurt lasted only a short time. Then Mr. who once headed up the company's operations in took over the helm. With Mr. Leiding in the boss's things began to among them a crash program to come up with new models to get Ihe company's sales train on the track again. Whether the price pressure on VW will sidetrack the no one really knows. Looking the company's strength seems to lie in a bevy of new vehicles the West German automaker is beginning to bring onto the market. Volkswagen 1974 Dasher is the old market shifting away from VW desparately gears for a global comeback WOLFSBURG If Volkswagen hopes to rock itself out of its deepening it will be because of new cars now on the way and not because the price is right to the buyer. The front- wheel-drive which VW unveiled in the U.S.earlier this is the first of a whole generation of new cars. Following Dasher into the world traffic stream is soon to be sold in Europe although it probably won't reach U.S. shores till the end of the year or early in 1975. The Karmann unchanged since is being ditched for the a car that bears the hallmark of Italian designer Giorgio Guigiaro. This is not all that VW has up its corporate sleeve. Another now known as the Golf smaller than the beetle will follow Scirocco into the showrooms by a few months. Like the U.S. version may carry another name. Still later in VW will bring at least two more cars to the one a Volkswagen and the other an Audi now code-named the EA 800 and Audi AO. VW clearly isn't planning to dump the at least mot in the foreseeable future. It has tremendous growth potential in such areas as Brazil and Mexico. for cost adds Horst a VW management board had to develop new technical That is what's happening with the and Golf. All the new cars from VW are part of its newly refined building-block which allows it to curb costs by having successive new models utilize many of the design and engineering concepts of previous thus eliminating the need for developing all new ideas for each successive new car. Therefore the Scirocco is based to some degree on the the Golf on the etc. Detroit relies on this practice so that General for uses the same basic and other features for new whether the exterior name is or Cadillac. So do Ford Motor and American Motors. The popular AMC Gremlin is simply a chopped-off Hornet. VW is nearing a decision on whether to go ahead and build an assembly plant in the United probably on the East Coast an agonizing decision it's been sweating out since at least 1971. The Swedish carmaker Volvo is planning to develop an assembly plant in the U.S. and the Japanese hint they also are pondering the idea. long wondered whether we should continue to maintain our thin supply line across the Atlantic between Germany and the observes Mr. all its implications so far as trade or economic policy of the U.S. is an occasional port strike has tied the company's delivery schedule into knots. What really brought the idea to a head was President Nixon's imposition of Phase 1 in designed to stem the tide of exports to the U.S At the time the imports were having a devastating effect on Detroit because of what was widely considered an unrealistic exchange rate between the dollar and foreign currencies such as the West German mark and the Japanese yen. Subsequent decline of the dollar from 4.2 marks to about 2.5 marks has forced VW to raise its prices to a shattering level with the cost of the basic beetle up about in the past 30 months. Recent U.S. trade-union demands for a curb on car imports has heightened the demand for a VW decision on the assembly-plant issue. a U.S. plant would supply thousands of jobs to American workers and defuse a lot of the criticism now voiced by the United Automobile Workers against imports. VW is diniing to turn out some cars a day in the U.S. if it decides to go ahead with the new facility. At stake is one-third of the company's total business. The cost of a new plant runs into the hundreds of millions of dollars. On the plus VW will gain far more flexibility in production and distribution than now exists with its tenuous floating pipeline across the sea. whether the company is allowed to make a positive decision probably lies with the 21-member supervisory board of now oriented toward the trade-union movement in Germany. The decision calls for joint approval of the directors as well as the 9-member board of headed by Martin Bros. Funeral Chapels Ltd. 2nd Generation Funeral Directors and Administrative Counsellors for Rre-Arrangements by the Alberta Government Security THE MEMORIAL CHAPEL 703 13th Street North THE TRADITIONAL CHAPEL 812 3rd Avenue Phone 328-2361 Connecting Both Chapels NOW IN OUR 52nd YEAR Member of A.F.D.S. Funeral Directors A World-Wide Connection Rudolf Leiding. VW also is dickering with 'the Romanian government over a potential assembly plant in the not to market the VW as such but to help that Communist-bloc country solve its basic transportation problem. of a few years ago built an auto plant in the Soviet Union and provided a highly trained technical staff to get it on the move. VW's Mexican subsidiary may soon work out a deal with Communist China in which the Peking government would import the Mexican-built a stark version of a versatile multipurpose vehicle with fold-down windshield and removable doors. All of this the rat-a-tat series of brand-new car a stepped-up drive to reduce ever-rising and the possibility of an assembly plant in the U.S. is aimed at moving VW out of the rut into which its wheels of production and sales are sinking deeper and deeper. Profit planning with TD Farm-Pac TD Farm-Pac is a package of financial including line-of-credit a variety of loans to meet your specific and low-cost farm loan insurance. Your local Toronto Dominion Bank Manager will show you how TD Farm-Pac can work for you. He's supported by a team of Agrologists available to help with farm management problems. He'll help you reorganize your farm finances using TD Farm- so that loan decisions can be based on sound financial planning and your farm's cash flow. Drop in at your nearest Toronto Dominion Bank and pick up your TD Farm-Pac kit. See how TD Farm-Pac can help you plan for your profit and for your future. II 1 TOROIVTODOMINION M pcopN- nukt. dilfer'.-nce o U'tttO.'V 75 ANNIVERSARY t 7K ANNIVERSARY 76 UNION 76 May 13 to May 25 Magrath Service 422 Mayor Magrath Dr. Phone 328-9766 Chimo Service 714 3rd Ave. S. Phone 327-0422 E v MILT WIEBE AL THIESSEN FREE Lawn Boy Gas Mower Boys' and Girls' Bikes c -f- Jftwl Entry Forms available May 13th to the 18th. Draw to be made May 18th. fe May 13th to the 25th OIL FILTER and LUBRICATION TUNE UP 4 Multi Oil Oil Filter Lubrication FREE GAS 6 Cylinder GAS Lsbor. Rmlilor Plugs intrs UNION 76 ANNIVERSARY IIMJQN 76 ANNIVERSARY UNiON 76 ANNIVERSARY UNION 76 ;