From Automotive news. It is subscription only but here is the link. It might work. If not I pasted the article. Sad news for VW but good news for us "informed" people already buying our Audis with Skoda badges on.

My link

Or: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101006/COPY/310069994#ixzz11aZx2LW7

PARIS (Bloomberg) -- Volkswagen AG's goal to surpass Toyota Motor Corp. in sales and profitability by turning out more models and building cars on shared underbodies is stoking unwanted competition among its own brands.

VW's strategy allows Europe's biggest carmaker to build a wider range of models across brand lines at a cheaper price by using the same engines and components. It also means customers may opt to spend less money and buy a car from the Skoda and Seat units instead of the more expensive VW brand.

“I specifically came here to look for a VW but Skoda is so much cheaper,†said Manfred Hennerkes, a factory mechanic at Siemens AG, taking a seat in a Skoda Superb at the carmaker's showroom on Berlin's Unter den Linden boulevard. “I don't care about the nameplate, it's essentially a VW for great money.â€

VW, undergoing a merger with Porsche SE, is seeking to overtake Toyota by 2018 by expanding sales and a line-up of about 200 models across its nine brands.

A similar strategy contributed to record losses at U.S. rivals General Motors Co. and Ford Motor Co. before they reversed course to reduce the number of brands and shed divisions.

“VW is becoming quite complex,†said Anil Valsan, director of automotive research at London-based Frost & Sullivan. “It remains to be seen to what extent VW can afford some of its brands cannibalizing each other.â€

Skoda, Seat

Volkswagen is losing 500 million euros ($681 million) in profit every year as VW brand customers flock to cheaper Skoda and Seat models, according to an estimate by Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen.

The unwanted crossover between Skoda and VW brand models contributed to Skoda chief Reinhard Jung losing his position to Winfried Vahland, previously head of VW's China unit, Dudenhoeffer said.

“VW's problem is they afford too many brands in respective segments and want the brands to cover large spectrums,†he said. “Skoda has done an excellent job at exploring the vast technology of VW. But they have developed a bit of a life of their own now. That hasn't escaped Winterkorn.â€

CEO Martin Winterkorn intends to integrate Porsche, maker of the 911 sports car, into VW's modular strategy under Porsche CEO Matthias Mueller, VW's former chief product strategist, who takes over on Oct. 1.

Winterkorn also plans to forge a trucks alliance between Scania AB and MAN SE, and develop small cars with Suzuki Motor Corp. after buying a 19.9 percent stake.

Alfa Romeo interest

And VW isn't done with expansion yet. The German company is still interested in buying the Alfa Romeo brand from Fiat SpA, supervisory board Chairman Ferdinand Piech told reporters on the eve of the Paris Motor Show.

Ford and GM are taking the opposite tack. Ford, the second-biggest U.S. carmaker, may trim its product lineup to as few as 20 models, CEO Alan Mulally said last week.

Ford sold Volvo Cars in August after previously divesting Jaguar, Land Rover and Aston Martin. GM, preparing for an initial public offering a year after a United States government bailout, sold Saab in February and has closed its Hummer, Saturn and Pontiac units.

VW's strategy was on display yesterday as the carmaker's brands showcased their new models at a group event the night before the start of the Paris show.

“We're aware that we have set a fast pace,†Winterkorn, 63, said in an interview at the event, where VW will show a facelift of the Passat model, Audi's new A7 coupe and Bentley's Continental GT coupe. “But we still have both feet planted very firmly on the ground. We have the experience and the skill to manage a multi-brand group of this format well.â€

Luxury competition

Multi-brand groups like VW are naturally at risk of over-expanding, though VW has developed a cost-saving strategy to run its portfolio, said Juergen Meyer, who manages 1 billion euros at SEB Asset Management in Frankfurt including Porsche shares.

The extent of the group's other units encroaching on core VW brand buyers is minor, and competition within the VW group is preferable to losing customers to rivals, he added.

Porsche will be vying with Audi and Lamborghini, the Italian maker of the $450,000 Murcielago SuperVeloce sports car, within VW to develop high-end sports cars, said Christoph Stuermer, an analyst at IHS Automotive in Frankfurt. Mueller's task will be to complement and expand Porsche's four-model lineup with a goal of doubling sales to 150,000 units, Winterkorn said July 6.

“The challenge for VW will be that modular-design policies won't work for supercars,†Stuermer said. “Lamborghini and Porsche have no choice but to stake out their differences. This somewhat exposes the limits of the VW philosophy.â€

Audi vs BMW

Volkswagen is targeting a pretax profit in 2018 that exceeds 8 percent of sales as part of a goal to boost annual sales to more than 10 million vehicles. The carmaker expects in 2010 to exceed last year's record 6.29 million deliveries on demand in China, VW's largest market.

VW, which posted a first-half net income of 1.82 billion euros, must turn around the loss-making Spanish Seat unit and Bentley ultra-luxury brand, as well as return the U.S. operations to profit to keep the profit momentum going.

“VW's well positioned but there's anything but reason for complacency,†said Stefan Bratzel, director of the Center of Automotive at the University of Applied Sciences in Bergisch-Gladbach, Germany.

Audi is lagging behind BMW AG and Daimler AG on hybrids and electric mobility, Bratzel said. BMW started testing 600 electric Mini models in 2009, while a similar project at Audi involving 20 A1 compact cars won't take off until next year.

Back in Berlin, Hennerkes is looking to sell his Golf station wagon and buy a Skoda. Built on a single platform, Skoda's Superb station wagon sells for 2,500 euros less thanVW's Passat model while the Fabia compact is 1,695 euros less expensive than VW's Polo.

“The Superb is effectively a Passat with a lower profit margin,†the 52-year-old German said. “It begs the question why VW is doing this?â€

If/when VW buys Alfa, sales will skyrocket me thinks.. I for one will want one..! I feel however that will further shoot itself in the foot of VW branding.. But then again I suppose they can play monopoly then if they do take over enough companies..

Why bother buying Alfa?

Surely they'd be better just head hunting the people that do the designs, so for instance they can leave Skoda/VW/Audi alone, but make Seat the brand for stunning, impracticle cars.

"The German company is still interested in buying the Alfa Romeo brand from Fiat SpA"

Looks like an Alfa, built like a Skoda

I'll have mine in red with tan leather please.

That would be great - an Alfa with fantastic styling and great reliability

Would it still be an "Alfa" though, if based on exisiting VW platforms?

If the interiors have to use VW switch gear and VW leather?

Will it be an Alfa if it has to use a group engine?

I'm not convinced on this one.. the price of reliabilty might be higher than you think..

It's position with in the group is quite obvious though... a grown up Seat as an alternative to Audi.

Edited 10 October, 201015 yr by Rob.