How the Volkswagen Group Rose from the Ashes of World War II To Become a Leading Automobile Company

How the Volkswagen Group Rose from the Ashes of World War II To Become a Leading Automobile Company

Starting as an armaments company for the Nazis, Volkswagen has evolved into a leading automobile company with a socially responsible brand image. Let’s take a closer look at its eventful journey…

Volkswagen Group is a leading name in the automobile industry, selling popular cars, including Audi and Porsche, to customers all over the world. 

Founded in Germany, Volkswagen Group sells reliable automobiles to customers across the globe and enjoys a high market share in the industry. Only second to Toyota, the company enjoys a market share of around 8% in the global automotive market. 

Key Statistics of 2021 Highlighting Volkswagen’s Growth: 

While the company has faced a few setbacks over the years, its sturdy digitization policy ensures its bright future ahead. 

Let’s take a deeper look at Volkswagen’s fascinating journey from an armaments manufacturer for the Nazis to one of the largest automobile companies in the world. 

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Volkswagen Rebuilds Brand Image After World War II 

Volkswagen had a rocky start. When it first began in 1934, it lacked the resources to follow through with its ambition of building the world’s largest automobile factory. 

Even worse was the fact that Volkswagen was the project of a political party—the Nazis. This meant that when the war broke out in 1939, the company’s resources were redirected towards the construction of military vehicles rather than cars.

After the war ended, the company did not just have to pile in resources to restart its production of automobiles, it also had to recreate its brand image from scratch, which had been tarnished by its affiliation with the Nazis. 

Let’s take a look at how Volkswagen picked itself back up after World War II. 

Volkswagen’s Business Strategy During the War 

In 1938, Adolf Hitler commissioned the production of the “people’s car” – which is now known as the Volkswagen Beetle. The most attractive features of this car were its affordability and reliability. 

The naming of the car itself was part of Volkswagen’s marketing strategy. As it was deployed by the Nazi Party, which was otherwise known as the National Socialist Party, the brand image of the car needed to be built around the common people.

the volkswagen beetle

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However, with the outbreak of war, Volkswagen was ordered to create a military version of the car. Alongside the military Beetle, the company also created amphibious vehicles, bunker stoves, and air armaments for the army.

During that time, Volkswagen was making use of foreign forced labor. As the war raged on, more reinforcements came in the form of prisoners of war, who were kept in air raid shelters in the Volkswagen plants and forced to partake in the production of armaments. 

The prisoners of war were already weak due to the duress of war, and they were often assigned physically-demanding tasks, which led to the deaths of many such detainees.

Despite the drudgery of the POW, they were barely paid for their labor, while the civilian workers from Western territories were favored and given good management positions alongside German staff. 

On the other hand, female prisoners were often separated from their babies a few days after birth. This led to the demise of many such children—the total count added up to 365 by the end of the war. 

By 1944, Volkswagen’s labor force consisted of around 11,334 people from various countries compared to the total workforce of 17,365 people. That is, it appears that Volkswagen’s business model revolved around making use of PoW to meet its labor shortage. 

The detainees were further terrorized in 1944 to speed up Volkswagen’s expansion. Since the demand for armaments surpassed the supply, the workers were forced to convert underground areas into factories in a matter of months.

former volkswagen labor liberated

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The company’s crimes didn’t end with the use of PoW. Volkswagen’s security was used to patrol surrounding areas and mete out punishments to offenders. The factory plants also provided space for the Nazis to set up concentration camps, while the same prisoners were used as labor.

The number of prisoners had drastically decreased when they were released in 1945. Most of them had died from disease and starvation, while the rest were liberated during April by American troops. 

Volkswagen’s Strategy of “Remembrance” 

No doubt, the company had committed many crimes during World War II. After it ended and the management changed over the years, the new leadership was entreated with the humongous task of rebuilding the company’s reputation. 

A potential policy could have been to distance Volkswagen from its dark history. While a tempting idea, the company decided to take the more socially responsible route: it accepted, acknowledged, and remembered its bloody roots, and commemorated the sacrifices of those who suffered under its tyranny.

In 1999, Volkswagen opened up the factory as a museum, called “The Place of Remembrance” to show visitors the sites where the heinous crimes of the war had taken place. There is no entrance fee for this museum to this day.

the volkswagen museum the place of remembrance

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The museum consists of six rooms: the first four rooms map out Volkswagen’s actions during the war while the last two rooms are dedicated to the remembrance of the prisoners. 

Room five, for example, is aptly named “Remembrance” and is a listening station, consisting of interviews from around 200 prisoners of war who were in the Volkswagen factory. 

This move was preceded by many others in an attempt to acknowledge the pain of the prisoners of war. For example, in 1986, Volkswagen’s Board of Management commissioned a research project, which would map out the history of forced labor in the company. 

In 1991, the company also funded DM 12 million for social/international activities related to the war, and in 1995, it established a fund through which it provided humanitarian aid to those personally affected by its crimes. 

Volkswagen specifically invited the affected people to visit their factory and to talk to the people, thereby giving them a voice to express messages of respect, tolerance, humanity, and peace in society. 

Key Takeaway #1: Social Responsibility Can Turn Around The Brand Image For Good

The new leadership of Volkswagen had a choice: they could ignore their history—after all, they weren’t the ones who had committed the crimes—or they could acknowledge it and use it to spread awareness regarding the repulsiveness of war crimes. 

The company ended up making the latter choice—and it paid off. Firstly, it distanced them from the philosophy of the Nazis; not acknowledging the crimes would have been suspicious. 

Secondly, it helped them create a socially responsible brand image. The new Volkswagen was tied with values of tolerance, peace, and respect. 

Lastly, it gave the company positive exposure. Since 1999, the old Volkswagen plants have remained open to students of history and other interested visitors. 

A scandal, a crime in the past, or a shady bit of history: these aren’t the end of the world. If you make a decent choice, then you might be able to get rid of a bad brand image! You just have to assure customers that you’re on the right side of history now, if not, then. 

Volkswagen Expands Portfolio Through Local and International Acquisitions

In 2020, Volkswagen climbed to the seventh position in the Fortune Global 500 List. This was largely a result of Volkswagen’s international expansion. 

Let’s take a look at the steps leading up to Volkswagen’s success. 

Volkswagen Grows Through Acquisitions After WWII 

The war left the company with bombed-out factories as well as disputed ownership. In 1948, the company was offered to Ford, but the vice president of Ford mocked the plant, saying it wasn’t “worth a damn.” 

What a mistake! In the following years, the rapid increase in Volkswagen’s market share and revenue would stand as proof of the company’s worth.

The start, of course, was slow. At first, the company settled on producing cars for the British Army, but by 1948, Volkswagen returned to German hands. From there, the company began producing the Type 60 Volkswagen, sales for which shot up in the 1950s and 1960s. 

During these years, the company introduced various updated models with similar foundational features. For example, all cars were air-cooled and had a rear engine. 

Its big breakthrough, however, came with the beginning of its history of acquisitions.

the volkswagen type 1 beetle 1956

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In 1965, Volkswagen acquired Auto Union GmbH. Ever heard of the Audi? The company’s new subsidiary sold its first post-war Audis after the acquisition. 

Another boost in Volkswagen’s market share came from its acquisition of NSU Motorenwerke AG, which was merged with Auto Union in 1969. Together, these newly joint companies generated billions in profits for Volkswagen. 

Volkswagen Acquires Leading Brand Names 

Auto Union was an excellent grab for Volkswagen, but the company wasn’t just satisfied with expanding locally.

In 1982, the company tentatively spread its wings outside of Germany, through a cooperation agreement with SEAT, a car manufacturer in Spain. 

At that time, the company was named “Volkswagenwerk” which meant “People’s Car” in German, but to mark its global expansion, the company altered the title to just “Volkswagen”. 

Four years later, the company acquired a 75% stake in the company, effectively making SEAT Volkswagen’s first non-German subsidiary. In another four years, Volkswagen acquired 100% ownership of the company.

volskwagen acquires seat and skoda logos

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The company followed a similar trajectory with Škoda automobilová of Czechoslovakia.

Volkswagen’s strategy was to begin its acquisition process with a partnership or cooperation agreement. In 1991, the company signed an agreement with Škoda automobilová, alongside a 30% stake. Three years later, Volkswagen owned 60.3% of the shares, and by 1995, the percentage climbed up to 1995. 

The company’s next acquisition proved to be tricky. Rolls-Royce Motors was on the market for sale but Volkswagen had to go up against BMW AG to acquire the prestigious company. While Volkswagen managed to outbid its competitor, BMW AG had a few tricks up its sleeve.

The brawl between the companies didn’t last for long. In sum, what happened was that BMW gained rights to the title “Rolls-Royce” while Volkswagen was allowed to use the name and logo until 2002 0nly. On the other hand, Volkswagen acquired exclusive rights to sell the Bentley cars, which made up around 60 to 70 percent of Rolls-Royce Motor Cars sales. 

Whether this was a win for Volkswagen or not is debatable, since Rolls-Royce is known better globally. However, what is important to notice is that while the company did not gain ownership of Rolls-Royce, it was able to expand into British and add an important car to its portfolio. 

By that point, Volkswagen’s success had become undebatable. The company’s next big win came in the form of the Lamborghini, another popular addition to its portfolio. The Italian car manufacturing company was placed under the care of Volkswagen’s Audi division, where it enjoyed increased productivity and revenue.

Volkswagen also acquired Bugatti, a French car manufacturing company, in 1998, making it by far the most successful year in its history. 

Volkswagen Takes Next Steps Towards Electrical Future 

Far removed from its dark past, the company has been on the road to success for a couple of years. With the acquisition of leading names in the industry and its move to electrical cars, Volkswagen’s revenue growth has been tremendous. 

In the past two decades, Volkswagen’s history has been full of major acquisitions. For example, in 2009, the company acquired a German niche automobile company run by Karmann. Another big win came for Volkswagen in the form of Porsche in 2012, when it won 100% of the company’s shares.

Other acquisitions included that of Scania and MAN SE. These companies were combined with Volkswagen’s Truck & Bus division in 2015. In 2016, RIO—a digital marketing brand—was added to the group, and then it was retitled the “TRATON” group. 

The Traton group was enhanced through the partnership with Hino Motors. The strategic agreement aimed to introduce e-mobility products in the market. 

Previously, Volkswagen Group had introduced “Strategy 2025” which was essentially an electrification strategy. That is, the company aimed to provide electric vehicles in the future including battery electric and fuel-cell vehicles. 

The agreement with Hino Motors was a step in that direction. Apart from this, the company had also begun investing in battery supplies, committing $48 billion to the project in 2018.

Key Takeaway #2: Expand Into New Subcategories With Acquisitions of Competitors

Volkswagen fought its best to get the Rolls-Royce title and logo but it was unable to do so—but it was the thought that counted. 

Investing in brand names had always been a part of Volkswagen’s strategy. For example, the company seized control of Auto Union, through which it became the owner of the well-known Audi. 

Later, the company also acquired Lamborghini, once again adding a popular brand name to its portfolio. 

Instead of assimilating these brands, Volkswagen allowed these brands to retain their original names, which would be easy sells in the market. 

Furthermore, Volkswagen was up-to-date with what the customers wanted. Aside from investing in popular brand names, the company understood the importance of sustainability in the current climate. 

While it was caught up in a scandal in 2015, the company built back its reputation through the introduction of electric cars. These would serve as proof of Volkswagen’s commitment to sustainability. 

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Volkswagen’s Digital Transformation Strategy

By 2021, Volkswagen had introduced its digital transformation strategy, claiming that it was transforming into a “tech group”. 

Indeed, with the nascent production of electric cars, the company did seem to be orienting itself to the technological market. 

Volkswagen Tightens Security and Reduces Policy-Breach Risk Through Digitization 

As part of the ACCELERATE strategy, which was the name given to Volkswagen’s digital transformation strategy, the company aimed to introduce new business models, which would create higher levels of efficiency in the factory and offices. 

Among the most successful initiatives of the new Volkswagen, the business model is the Industrial Cloud.

volkswagen industrial cloud

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Volkswagen has grown exponentially over the past few years, which means that coordination between its plants has become even more difficult. The Cloud is an easy fix: simply put, it amalgamates data from all factories and helps in analyzing the productivity of the plants. 

Volkswagen claims that this will lead to “new levels of productivity” across the board, integrating the global supply chain for more than 30,000 locations. 

The goal of the cloud is to become “fast, more transparent, and safer” while allowing for real-time control. 

The cloud allows the management to quickly spot glitches and defects in products and identify the plants where there is a lag in efficiency. Increased surveillance also reduces the chances of blunders on the part of the workforce, while the security offered by the cloud system ensures that no outsiders can attack Volkswagen’s software.

The Industrial Cloud was made in collaboration with Amazon Web Services, which is well-known for its expertise in IT. 

On the other hand, Volkswagen has also introduced Artificial Intelligence (AI) in its office.

The use of AI is a part of Volkswagen’s sustainability strategy. In its factories, AI detects sustainability lags in supply chains and informs the central management of any breaches of the policy. Since 2020, this system has supervised around 4,000 supply chains. 

AI is also used to identify oil foaming (an undesirable outcome for engines) and battery aging. Porsche has also introduced the Porsche Engineering Reinforcement Learning (PERL) program, which is currently testing the uses of AI in the production of chassis and electronics. 

Volkswagen Becomes the First to Use Quantum Computers for Smart Traffic Control

What are quantum computers? As you can guess by the name, they are operated based on the rules of quantum physics. What’s important, however, is that they are faster and they can run complex simulations. This is why Volkswagen’s bold move of using such computers is a huge deal. 

In 2019, the company tentatively launched its pilot project, using nine MAN buses as the sample. Using a quantum-computer system, Volkswagen tested whether they could successfully calculate the fastest route for each of the nine buses in real-time. 

The system predicts the number of passengers and offers an optimized route for each bus. The tailored routes, in turn, allow the buses to circumvent traffic bottlenecks before they even arise.

volkswagen quantum routing

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The use of quantum computers for smarter traffic control is a nod to Volkswagen’s innovative streak. Along with reduced commute times, residents of the city will enjoy a more sustainable transport system, as this will automatically mean reduced emissions on the road.

In 2021, Volkswagen decided to bring the project from the labs into the factory, the results of which are yet to be seen. 

The company is also researching the use of quantum computers for “tailor-made batteries”. For research purposes, Volkswagen has partnered with Google and D-Wave

How did Volkswagen’s Digital Transformation Benefit its Customers? 

Volkswagen’s digital transformation within its factories and plants is remarkable, but that’s not the only area where the company is using technology. 

Keeping with the trend these days, Volkswagen has also introduced car-sharing, ride-pooling, and micro-mobility services such as VW Move, which connect customers all over Berlin.

the volkswagen move app

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The introduction of such applications allows Volkswagen to make new leaps in urban mobility. Not only does the venture allow people who don’t own vehicles to move freely in the capital city, but it is also an environmentally-friendly initiative. As congestion decreases on the streets, Volkswagen’s sustainability image grows, earning it a socially responsible brand image.

Even more remarkable is the company’s aim to introduce autonomous driving by next year. Self-driving cars seem to be all the rage across the world although they aren’t frequently seen on the road. Volkswagen, however, claims that it plans to be the leading global automobile manufacturer of such cars by 2025! 

What is Volkswagen’s Business Strategy for the Future? 

Volkswagen had already introduced its electrification strategy previously but in 2021, the company went a step ahead and proposed the “New Auto Strategy”.

This strategy aimed for a transition to (mostly) electric cars by 2024. This put Volkswagen one year ahead of its competitor, Honda, which aimed to do the same by 2025.

Volkswagen’s strategy also included the construction of six battery factories all over Europe by 2030.

The move to electric cars would not just raise Volkswagen’s market share, but it would also help the company’s brand image which had been tarnished by the emissions scandal in 2015. 

The company had been adding “defeat devices” to their cars so when emission tests were being conducted, the emissions were automatically reduced. Since Volkswagen was causing damage to the environment, it was only right that it should move to a more environmentally-friendly option (a.k.a. electric cars) in the future.

Key Takeaway #3: Invest In The Latest Technologies to Create New Solutions 

Volkswagen’s use of quantum computers has gained much traction over the years. While still in the testing stage, this project shows promise, as it introduces environmentally-friendly solutions in a world damaged by climate change.

Most businesses are tentative to approach new technologies because of the amount of investment required. However, with the right approach, they could shift the competitive landscape. 

By partnering with leading technology companies such as Google, Volkswagen’s research and development have yielded promising results. If its plans come to fruition, the company might just become the most coveted business on the stock market, as it trailblazes into the future! 

Why Is Volkswagen So Successful? 

Volkswagen’s strategy of expansion and innovation has made it a leading automobile company in the industry. 

Over the years, it has made many smart decisions that have allowed it to rebuild its reputation and get through the worst of scandals. 

Who owns Volkswagen today?

Porsche Automobile Holding SE currently owns the most shares at Volkswagen Group (around 53%), followed by the State of Lower Saxony which owns 20% of the shares. 

Volkswagen’s Vision 

Volkswagen began with the idea of creating a “people’s car” and it still carries that ideology, aiming to create mobility and access for all citizens. 

“To make this world a mobile, sustainable place, with access to all citizens”. 

Volkswagen’s Mission 

Volkswagen aims to offer products that set it apart from its competitors. 

“To offer attractive, safe, and environmentally sound vehicles which can compete in an increasingly tough market and set world standards in their respective class.”

Growth by Numbers

2021

2013

Sales Revenue

€250.2 billion

€197 billion

Operating Profit

€19.3 billion

€11.7 billion

Share Price 

€258.4

€196.9

Workforce

668,000

572,800

Many lessons can be extracted from the company’s long and remarkable journey. 

Rebuild Your Brand Image Through Acknowledging Your Past Mistakes 

You might be daunted by an unfortunate scandal or a shady origin story, but it can’t be as bad as being part of the horrors of World War II. 

Volkswagen was extremely unfortunate in that aspect yet it picked itself up through effective marketing—and honesty. 

Confronting its dark history, Volkswagen used its platform to give voices to its victims. This was a triumph not just for the company but also for those affected by the horrors of that time. 

Volkswagen’s strategy of acknowledging and rectifying its image was present throughout its history. After the emissions scandal, instead of avoiding conversation, the company apologized and played an active role in strengthening its sustainability policy. 

Associate Yourself with Leading Popular Brands 

Expansion was a huge part of Volkswagen’s strategy but the group never settled for any run-of-the-mill business. 

Aiming for the sky, the company acquired renowned brand names like Audi, Lamborghini, and Porsche, attracting the attention of customers all around the world. 

If you’re expanding anyway, then it’s a good idea to think closely about what the company contributes to your business. Sometimes, the product title might just bring about more customers than your own brand name! 

Collaborate with Expert Companies to Innovate New Products 

Google isn’t any small company! And so, it turns out, neither is D-Wave when it comes to quantum computing. 

Volkswagen leaped at the first opportunity to partner with such huge names, trusting in their expertise to bring its new idea to fruition. 

Once again, Volkswagen was clever with its decision-making, aware of exactly where to be generous with its money and time.

The Volkswagen Group began on a rocky path but ever since then, it has been sailing smoothly, earning itself the biggest market share in Europe in 2016. Adding a wide range of automobiles to its portfolio through acquisitions, the company offers the best products to its customers, while tirelessly working to create new solutions as part of its sustainability policy. 

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