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Volkswagen feuds with thriving stablemate Skoda

BERLIN, Oct 4 (Reuters) - Volkswagen managers and unions are seeking to curb competition from lower-cost stablemate Skoda, move some of its production to Germany and make the Czech brand pay more for shared technology, company sources told Reuters. As VW struggles to cut jobs and spending at German factories and turn the page on dieselgate, Skoda's superior car reviews and profitability have intensified the brands' rivalry within the Volkswagen empire. VW now wants to reduce what it sees as Skoda's unfair advantages - combining German technology with cheaper labor - and reaffirm the top-selling brand's primacy ahead of a wave of new electric car launches, the sources said. The tussle between VW and Skoda is reviving tensions at the heart of the Volkswagen group between profits and jobs, and between central control and autonomy for its 12 vehicle brands. "Instead of devoting our efforts to beating Tesla, we may just be setting up a futile internal conflict," said one manager. Once the butt of jokes, Skoda has blossomed under 26 years of VW group ownership into a successful mid-market carmaker, steadily winning business from rivals - including VW - and surpassing even Audi's operating profit margin last year. At the same time, VW is facing thousands of job cuts as management moves to trim excess capacity at German factories. Its powerful domestic unions see Skoda's success as both a threat and a potential lifeline. VW workers' representatives are now demanding the transfer of some Skoda production to their underused German plants, a source close to the supervisory board told Reuters. The proposal aims to offset declining output of the VW Passat and aging Golf that could otherwise threaten more jobs. They are also making the case that Skoda should pay higher royalties to use VW's main common vehicle platform. The so-called MQB architecture also underpins mid-sized models from the group's Audi and SEAT brands. Responding to the news, Czech Prime Minister Bohuslav Sobotka said he would meet Skoda management and unions to ask for clarification. The government will seek to ensure that VW investment plans are followed through and that "production is not moved outside the country," a statement released by Sobotka's office said. Skoda's main union warned that a production shift could cost as many as 2,000 jobs. VW's works council declined to comment.

The UK votes for Brexit and it will impact automakers

It's the first morning after the United Kingdom voted for what's become known as Brexit – that is, to leave the European Union and its tariff-free internal market. Now begins a two-year process in which the UK will have to negotiate with the rest of the EU trading bloc, which is its largest export market, about many things. One of them may be tariffs, and that could severely impact any automaker that builds cars in the UK. This doesn't just mean companies that you think of as British, like Mini and Jaguar. Both of those automakers are owned by foreign companies, incidentally. Mini and Rolls-Royce are owned by BMW, Jaguar and Land Rover by Tata Motors of India, and Bentley by the VW Group. Many other automakers produce cars in the UK for sale within that country and also export to the EU. Tariffs could damage the profits of each of these companies, and perhaps cause them to shift manufacturing out of the UK, significantly damaging the country's resurgent manufacturing industry. Autonews Europe dug up some interesting numbers on that last point. Nissan, the country's second-largest auto producer, builds 475k or so cars in the UK but the vast majority are sent abroad. Toyota built 190k cars last year in Britain, of which 75 percent went to the EU and just 10 percent were sold in the country. Investors are skittish at the news. The value of the pound sterling has plummeted by 8 percent as of this writing, at one point yesterday reaching levels not seen since 1985. Shares at Tata Motors, which counts Jaguar and Land Rover as bright jewels in its portfolio, were off by nearly 12 percent according to Autonews Europe. So what happens next? No one's terribly sure, although the feeling seems to be that the jilted EU will impost tariffs of up to 10 percent on UK exports. It's likely that the UK will reciprocate, and thus it'll be more expensive to buy a European-made car in the UK. Both situations will likely negatively affect the country, as both production of new cars and sales to UK consumers will both fall. Evercore Automotive Research figures the combined damage will be roughly $9b in lost profits to automakers, and an as-of-yet unquantified impact on auto production jobs. Perhaps the EU's leaders in Brussels will be in a better mood in two years, and the process won't devolve into a trade war. In the immediate wake of the Brexit vote, though, the mood is grim, the EU leadership is angry, and investors are spooked.

VW bringing fuel cell concept to LA Auto Show

Amid the flurry of hydrogen announcements from Toyota and Honda last night, Volkwagen has something to add: a new hydrogen fuel cell concept vehicle. This will be the first VW hydrogen fuel cell vehicle in many years – remember the Tiguan Hy-Motion back in 2008? – and it comes as a bit of a surprise. First written up by the German publication Wirtschaft Woche, VW is going to have the prototype car (not pictured) available at the ride and drive at the Los Angeles Auto Show later this week. We don't yet know what kind of vehicle will sport the hydrogen powertrain, but our money's on a Golf variant. We'll see soon enough when we get to Los Angeles. What's interesting is that there have been a number of not-so-mixed messages out of the VW executive ranks when it comes to hydrogen vehicles. VW's Japanese president, Shigeru Shoji, said in September that, hydrogen fuel cells, "may fly within Japan, but not globally." Last year, VW's electrification head Rudolf Krebs said that "hydrogen mobility only makes sense if you use green energy." Also last year, VW CEO Martin Winterkorn said it's basically impossible to build hydrogen vehicles at a "reasonable cost." Nonetheless, we're going to see a new VW H2 concept soon. Thoughts?