History and Background of Volkswagen AG

Volkswagen AG. is a German automaker that operates in the global automotive industry as a manufacturer and distributor. Volkswagen of America is one of its subsidiaries that is based in the United States. The Group’s principal activities are to design, manufacture and distribution of cars and other vehicles worldwide. The Group’s activities are carried out through two divisions: Automobile and Financial services. The Automobile division comprises the development of vehicles and engines, as well as the production and sale of passenger cars, commercial vehicles, trucks and buses. The Financial Services includes dealer and customer financing and leasing, banking and insurance activities, vehicle rentals and the fleet management business.

History and Background of Volkswagen AG

It is Europe’s no one car maker. The Group’s main product lines include the Volkswagen Passenger, Audi, SEAT, Skoda, Lamborghini, Bugatti and Bentley ranges of vehicles. Volkswagen aims to increase its focus on core business, reduce production costs, and enhance profitability. To achieve these goals, the company is considering various strategic and business development initiatives such as divesture of the non core business segments, adapting modular strategy in production process, restructuring, and introduction of new models.

It was in 1930 when Ferdinand Porsche had just set up an automotive design company, which became known as the Porsche Buro in Germany. In the early 1930’s the German car industry’s made mostly luxury cars. In those days it was not possible for everyone to afford a car. An average German could afford nothing more than a motorcycle.

In 1934, Ferdinand Porsche was commissioned to build a small inexpensive car at the request of Adolph Hitler. Hitler required a basic vehicle capable of transporting two adults and three children at 100 km/h (62 mph). And this car would be available at the price of a motorcycle. By then an already famed engineer, Porsche was the designer of the Mercedes 170H, and worked at Steyr for quite some time in the late 1920s. He landed two separate “Auto für Jedermann” (car for everybody) projects with NSU and Zündapp, both motorcycle manufacturers. Neither project come to fruition, stalling at prototype phase, but the basic concept remained in Porsche’s mind time enough, so on 22 June 1934, Dr. Ferdinand Porsche agreed to create the “People’s Car” for Hitler. Changes included better fuel efficiency, reliability, ease of use, and economically efficient repairs and parts.

The intention was that ordinary Europeans would buy the car by means of a savings scheme, which around 336,000 people eventually paid into. Volkswagen honoured its savings agreements in West Germany after World War II. Prototypes of the car called the “KdF-Wagen” appeared from 1936 onwards. The car already had its distinctive round shape and air-cooled, flat-four, rear-mounted engine. The VW car was just one of many KdF programs which included things such as tours and outings.

The prefix Volks- (“People’s”) was not just applied to cars, but also to other products in Europe; the “Volksempfänger” radio receiver for instance. On 28 May 1937, the Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH was established by the Deutsche Arbeitsfront. It was later renamed “Volkswagenwerk GmbH” on 16 September 1938. Erwin Komenda, the longstanding Auto Union chief designer, developed the car body of the prototype, which was recognizably the Beetle known today. This let to the production of the car Beetle.

Only a handful of cars had been produced before the 2nd WW started in 1939. Post war existence owed to a British major Ivan Hirst who took control of the bomb chattered factory. Hirst intended to dismantle the factory and ship it to Britain. No British car manufacturer was interested in the factory as it lacked the fundamental technical requirements of a motor car. The company survived by producing cars for the British army. Volkswagens were first exhibited and sold in the United States in 1949, but only sold two units in America that first year. On its entry to the U.S.market, the VW was briefly sold as a “Victory Wagon”. Volkswagen of America was formed in April 1955 to standardize sales and service in the United States.

Volkswagen advertisements became as popular as the car, using crisp layouts and witty copy to lure the younger, sophisticated consumers with whom the car became associated. Even though it was almost universally known as the Beetle (or the Bug), it was never officially labeled as such by the manufacturer, instead referred to as the Type 1. The first reference to the name Beetle occurred in U.S. advertising in 1968.

Although the car was becoming outdated, during the 1960s and early 1970s, American exports, innovative advertising, and a growing reputation for reliability helped production figures surpass the levels of the previous record holder, the Ford Model T. On February 17, 1972 the 15,007,034th Beetle was sold. Volkswagen could now claim the world production record for the most-produced, single make of car in history. By 1973, total production was over 16 million.

VW expanded its product line in 1961 with the introduction of several Type 3 models, which were essentially body style variations based on Type 1 mechanical underpinnings, and again in 1969 with the larger Type 4. These differed substantially from previous vehicles, with the notable introduction of monocoque/unibody construction, the option of a fully automatic transmission, electronic fuel injection, and a sturdier powerplant. In 1964, Volkswagen succeeded in purchasing Auto Union, and in 1969, NSU Motorenwerke AG (NSU). The former company owned the historic Audi brand, which had disappeared after the Second World War. VW ultimately merged Auto Union and NSU to create the modern day Audi company, and would go on to develop it as its luxury vehicle marque. However, the purchase of Auto Union and NSU proved to be a pivotal point in Volkswagen’s history, as both companies yielded the technological expertise that proved necessary for VW to survive when demand for its air-cooled models went into terminal decline as the 1970s dawned.

Volkswagen was in serious trouble by 1973. The Type 3 and Type 4 models had sold in much smaller numbers than the Beetle and the NSU-based K70 also failed to woo buyers. Beetle sales had started to decline rapidly in European and North American markets. The company knew that Beetle production had to end one day, but the conundrum of replacing it had been a never-ending nightmare. VW’s ownership of Audi / Auto Union proved to be the key to the problem – with its expertise in front-wheel drive, and water-cooled engines which Volkswagen so desperately needed to produce a credible Beetle successor. Audi influences paved the way for this new generation of Volkswagens, known as the Polo, Golf and Passat.

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