Explain the reasons behind the failure of the visionary strategy of Volkswagen from becoming the number one automaker in the world

What will be an ideal response?

A deeper understanding of Volkswagen's place in the auto industry requires an overview of Chairman Carl Hahn's attempts to implement his vision of VW as Europe's first global automaker. By 1970, the Beetle was a mature product in Europe, sales were still moderately strong in the United States and were booming in Brazil. The chief executive officer of VW proposed switching the German plants entirely to the new model, the successor to the Beetle, which the German plants would also supply to the U.S. market. The continuing demand for Beetles in the United States would be satisfied out of Brazil. To assure the American customers of the "German quality" that was one of the Beetle's main attractions, the critical parts such as engines and transmissions for all cars sold in North America, would, however, still be made in Germany. Unfortunately, this visionary strategy failed. One problem was resistance on the part of the German unions. A second problem was confusion among American dealers about a car that was equally "made in Germany," "made in Brazil," and "made in the USA." Hahn's strategic plan for the 1990s and beyond called for a decentralized structure of four autonomous divisions. In pursuit of this vision, Hahn invested tens of billions of dollars in Czechoslovakia's Skoda Auto Works and SEAT in Spain. In Spain, VW hoped to take advantage of labor rates 50 percent lower than in West Germany. Spain was an attractive location for small-car production. Besides serving the domestic market, VW intended to use Spain as a production source that would allow it to cut prices and boost margins in Europe. Similar reasoning was behind VW's 1991 purchase of a 31 percent stake in Skoda. However, the product quality was low, and the plant was a major source of pollution. Hahn's successor, Ferdinand Piech took drastic actions and cost cutting measures. All these changes in the strategy affected the growth and competitive status in world market.