JULY 11, 2008

Volkswagen and F1

Hans-Joachim Stuck, the man who is in charge of all Volkswagen group motorsport activities, has told the Austrian newspaper Vorarlberger Nachrichten that the Wolfsburg conglomerate will not be entering Formula 1 in the next three years. This is not a surprise. Last autumn the company's chairman Dr Martin Winterkorn announced ambitious plans for the company to expand in the world's largest automotive market, which Winterkorn says is the firm's "top priority" at the moment. Winterkorn set ambitious targets to increase US sales for both VW and Audi, with the aim being to triple VW sales from 235,000 to 800,000 and to double Audi sales from 90,000 to 200,000 by the year 2018. It has been rumoured for some time that Audi may build its own factory in the United States in order to offset the effects of currency fluctuation, which has been a big problem in recent years. The details of this have yet to be decided as both VW and Audi may build separate facilities as in recent years the two firms have not been using the same vehicle platforms.

Audi is currently at a huge disadvantage compared to rivals BMW and Mercedes-Benz as both manufacture vehicles in the US: BMW in Spartanburg, South Carolina and Mercedes-Benz in Tuscaloosa, Alabama. It is rumoured that VW is looking at sites in Alabama, Tennessee and Michigan. All three states are offering financial incentives and with the current exchange rate it is a good time for European firms to be expanding in the US. An announcement of a factory is expected within the next few days.

In the light of this it is more likely that we will see Audi investing in racing in the United States. The company has dominated the American Le Mans Series for years but recently sent a representative to a forum at Indianapolis to discuss the future engine rules of the Indy Racing League.

Stuck, who was a Grand Prix driver in the 1970s, says that VW is constantly looking at Formula 1, but says it is "not realistic" to consider anything happening in the course of the next three years, because of "uncertainties in the regulations" and the current policy of freezing engines.

At the moment VW brands are involved in many different areas of the sport: Audi is active in DTM and sports car racing; SEAT in the World Touring Car Championship; Skoda in rallying and VW itself in Formula 3 and raid rallying.

These are interesting times for Volkswagen as the Porsche company continues its effort to gain full control of the VW empire. Porsche is currently waiting on a ruling from the European Commission to discover whether or not the state of Lower Saxony can be allowed to retain a veto on some decisions, despite owning only 20% of VW's shares. The German government has supported Lower Saxony, but says it will comply with EU law if the European authorities rule against Lower Saxony. If this goes ahead Lower Saxony will need to control 25% of the firm in order to retain control. The state says that if that happens it may try to force the national government to buy shares to maintain public sector influence over VW as it guaranteed to retain control of the firm in perpetuity back in 1959.

A Porsche takeover could have significant effects on VW policy in the longer term.