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"It won't be a smooth ride at times"

Interview with Thomas Sedran, the new Chairman of the Board of Management of Volkswagen Commercial Vehicles

Thomas Sedran, the new Chairman of the Board of Management of Volkswagen Commercial Vehicles, talks about the rapid change in the industry through alternative drives, networking, automated driving - and how he wants to meet it.

You were previously responsible for the strategy of an entire 12-brand group and in your private life you prefer to drive a Porsche. What brings you to VW Commercial Vehicles, Mr. Sedran?

Volkswagen Commercial Vehicles is a hugely successful brand that is facing the dawn of a new era. And when it comes to vehicles, I previously owned a T4 Atlantis that I had great experiences with. I really loved that vehicle.

You joined Volkswagen in November 2015. How did that come about?

I met former CEO Matthias Müller at events from time to time. Three days after becoming CEO, he called and asked if I wanted to take on the newly created post of head of strategy – a dream job.

A role that you have now given up to assume a leading position within the company?

It's about shaping the company. Look at the starting position: VW Commercial Vehicles is very successful with premium minivans and transporters. The brand is more profitable than ever, my predecessor Eckhard Scholz did a good job…

The brand is more profitable than ever.

Thomas Sedran Chief Executive Officer Volkswagen Commercial Vehicles

The workforce has just said goodbye to him with standing ovations...

And rightly so, because he achieved a lot. At the same time, however, our market is fundamentally changing. The future limits for carbon dioxide – so ultimately, fleet consumption – are turning the entire product range upside down. We still need modern diesel engines, but increasingly also electric and hybrid drives to meet requirements. Here we are facing a huge challenge!

Ultimately, the diesel issue also hit VW Commercial Vehicles and the sale of transporters had to be temporarily stopped. Is there the risk of further nasty surprises here?

The fact that the problems with the transporter were discovered only two years after the actual issue through our own measurements is generally a positive sign for me. If we find something ourselves we don't hide it. But it also shows that we must continue to work intensively on changing our culture. We have to be more reputable.

All urban logistics are in a state of upheaval.

Some metropolitan areas in the world want to refuse entry to cars with internal combustion engines. When will electric drives become established in transporters?

We will electrify vehicles very quickly in all classes – that is, we will offer them with a 100% electric motor or as a hybrid. Our e-Crafter will be coming onto the market in September. At the IAA Commercial Vehicles, we will be presenting further products that will soon be available to order. But buyers of commercial vehicles are extremely price sensitive and so the cars must remain affordable. And the drive is not the only topic of conversation: at the same time, transport tasks are changing in the cities. The entire urban logistics is in upheaval, especially in terms of city traffic where there will soon be fully autonomous vehicles.

An electric Crafter has just been revealed. It costs €70,000. Maybe we should talk about affordability again?

The purchase costs are certainly high. This is related to the fact that the battery alone costs between €6,000 and €7,000. However, these kinds of vehicles are much cheaper to maintain. There is less wear. They require fewer spare parts. And filling up with electricity is cheaper. These maintenance costs are already significantly lower for some electric commercial vehicles than for those with an internal combustion engine. Customers are increasingly looking at that aspect. And the ability to reduce purchase costs is also always dependent on the production of large quantities.

Photographer: Krisztian Bocsi/Bloomberg via Getty Images

There will soon be fully autonomous vehicles in urban traffic.

Thomas Sedran Chief Executive Officer Volkswagen Commercial Vehicles

This brings us to VW Commercial Vehicles' new partner Ford, who will apparently provide for larger quantities. You announced this collaboration a few weeks ago when you were still in your old role as head of strategy for the Group. What can we expect from "exploring the potential of a strategic collaboration", as mentioned in the announcement?

We are talking to Ford about various projects at group level, but there is a clear focus on light commercial vehicles. Although Volkswagen is the largest car manufacturer in the world, we still don't have the scale in certain areas to achieve optimal cost positions. This applies to VW Commercial Vehicles, for example.

The brand still manages to sell half a million cars a year.

That's true, and it is extremely successful in Europe. But up to now, the development of new models has always been a herculean task, and this effort is growing. Alternative drives, connectivity, automated driving – all this requires high investment. The one-time costs for introducing a new model are increasing by half, doubling in some cases, meaning we have to distribute new arrivals in larger quantities in order to be competitive.

Does this mean that developers will work together in the future?

We are currently exploring the possibilities of a collaboration. I am very confident that we will have something more concrete to say about this in the coming months. However, nothing definite has been decided yet. Only when this is the case can we think about how we might be able to develop the next generations of models together.

The T7 is almost ready to go.

It sounds as though you are already far beyond "exploring". Are the partners teaming up?

There are no plans for cross-ownership. It's about an extensive industrial cooperation. We will provide details in due course.

The centerpiece of the range is the Transporter, which is now in its sixth generation. Will the seventh generation be co-created with Ford?

The T7 is almost fully developed, on our own. We will see how we decide to further advance the model range in the future.

So will VW Commercial Vehicles and Ford also carry out production together?

All this is part of the talks. I must ask for some patience here.

Even so, you already know that about 15,000 employees of WV Commercial Vehicles in the Hanover area are losing sleep now?

Of course, I can understand their fears. I can only address these fears through us constantly working on our competitiveness. Something which is still good today, can look very different in a short time. It is our joint responsibility to bring attractive and profitable products to Hanover to secure employment.

This is something the workforce has heard before.

This is an unfortunate problem: in the past, sometimes expectations were raised and promises made that were not fulfilled.

Have you already had your inaugural visit to the Prime Minister?

I've had several – I visited Stephan Weil, Mayor Stefan Schostok, and I also led the initial discussions with the Works Council. Here I hope for more concrete results by the end of the year. We have always managed to find good solutions for people. As an employer, we feel it is our duty to do so.

But will there be any trouble in the meantime?

It won't be a smooth ride at times. But it's the same situation everywhere. Commercial vehicle manufacturers have a very price-conscious clientele, and our job is to offer competitive products. We cannot afford to be a thousand euros more expensive than the competition.

For some models, this does not seem to have done any harm so far.

Earlier, I mentioned premium minivans, for example the Multivan, for a reason. There is a different price sensitivity here. And the team builds these types of vehicle to an excellent quality standard. This is a real asset that we will maintain.

But this is not enough to operate the Stöcken plant at full capacity.

That’s right. We need to make new, different products here.

Photographer: Krisztian Bocsi/Bloomberg via Getty Images

Ford would open up new possibilities for us.

The only relevant innovation on the horizon seems to be the I.D. Buzz, which is a kind of electric Bulli.

I won't say whether this is the only innovation. In any case, the Hanover plant will compete for production of the I.D. Buzz. As always, we will have to work hard to win the work, but the team here has the potential. I want to appeal to their sense of pride. We still have a few goals to score.

We've already talked a lot about the costs and growth that a partner brings. Where is the growth potential for VW Commercial Vehicles?

Around the world. We are the market leader in Europe, but less well represented than we have come to expect from Volkswagen in many other regions. I recently spoke about the scarcity of resources – this has also repeatedly slowed down the development of new markets. We will have more scope for internationalization. In China, for example, we are already negotiating with our partner JAC. Ford would also open up new opportunities for us internationally.

How does such a collaboration actually work? Thousands of employees on both sides see each other as competitors, while a few small teams form a cooperation?

Fortunately, the partners are not complete strangers. VWN and Ford have worked closely together before, for example in AutoLatina, a strategic alliance for South America. The interesting thing is that when this joint venture came to an end in 1995, there was no conflict or bad opinion of one other. Today, we have key figures on both sides who were involved back then. The cultures of the companies would be a good match.