VWB: Driving strategy with the balanced Scorecard.

The Automotive Landscape in Brazil

a) Automotive sector responsible for 19% of Brazil`s GDP

b) Employed 1.5MM people in more than 200.000 companies
c) By 2008 Brazil had 28 assemblers producing cars/trucks in 49 plants
d) Total production capacity 4MM vehicles and $74bi revenue per year
e) Brazil was the sixth largest producer and fifth largest consumer
f) In 1991 VW, Fiat, Ford and GM held 97% of market share, in 2008 share declined to 77% as
Asian and French OEMs penetrated the BR market
g) Even though Schmall still saw opportunities to grow in the country: Brazil has only 1 car for
every 6.9 inhabitants, while this ratio is 1 to 1 in US, 1 to 2 in Germany, 1 to 3 in South Korea and
1 to 4 in Mexico

Volkswagen do Brasil

a) In 2008 Volks global Market share = 10,3%. The third largest car manufacturer in the word.
b) 370.000 employees , $113bi sales from 6.3 million units sold under 10 different brands.
c) Volks Brazil was the third larger subsidiary in Volkswagen, behind China and Germany
d) 4 plants in Brazil, $7bi revenue and 22.000 employees.
e) Most complete car portfolio in the country
f) In 1953 Volks open the first plant in Brazil, in Sao Paulo with 12 employees. From imported parts
g) In 1956, Introduced a van with 50% of the parts produced locally
h) In 1969, strategy to produce reliable and inexpensive cars led to 61% share
i) In the 70s, Volks focused on exporting cars, accounting for 41% of car exports.
j) In 1986, Over capacity and Macroeconomic situation in Brazil led to 20% sales decline.
k) First years of 90s, market rapidly expanded total Brazil`s productions of 1.1MM units in 1993
l) VWB domestic sales dropped from 580 thousand units in 1997 to 280,000 units in 2003
m) VWB tried to maintain minimum production levels with exports which increased from 45,000
units in 1997 to 164,000 in 2003, but currency issues (Real appreciation) and increases in local
labor and raw materials defeated VWB export strategy

Thomas Schmall - CEO Volkswagen Brazil (VWB)

a) Introduced Balanced Scorecard (BSC) in VWB in 2007

b) Now 45 years
c) To reverse 8 consecutive years of share decline and financial losses
d) So far (end of 2008) turnaround had been successful,
e) but 2008 financial crises started to impact 2009
f) Schmall cautious about whether restore funding or wait sales recovery.

The new VWB Management Team

a) In 2007 appointed Thomas as CEO

b) Started career as assembly-line supervisor and had many managerial positions in Germay, South
Africa, China and Mexico.
c) Attracted corporate attention when he introduced new procedures in the way production and
managers interacted in Wolfsburg
d) He did not want to continue to reduce costs in Brazil, laying-off people and decreasing
production capacity. He wanted to build a high-performance team that would drive VWB to
became South America`s industry leader in quality, innovation and profitability.
e) Appointed Josef Seen, 53, as VP of HR. Was an expert of balanced score card implementation.
f) His first task in Brazil as HR VP was to renegotiate a contract with the powerful local workers
union. The difficult years had made VWB bureaucratic and conservative creating a bad
atmosphere with employees.
g) The change in management approach for working with employees was crucial to stablish a new
culture that could sustain improved financial performance

Using a Strategy Map and Balanced Scorecard for Cultural and Strategic Change
a) A new relationship with key stakeholders was necessary: employees, suppliers and dealers.
b) BSC = a tool that could change the mindset of the company and align objectives from CEO to
shop floor.
c) Senn`s department appointed to led the implementation project.
d) Strategy map based on 4 dimensions: Finance, customers, internal process, Potential & Growth
e) Developing the right 20 metrics to translate strategic objectives was as important as defining the
objectives themselves.
f) With the senior executives on board of the plan them presented it to the next level of 400 VWB
executives. CEO led the event with big communication impact to energize all the team
 Communicating the Balanced Scorecard
a) To accomplish a transformation of this magnitude you need a clear comprehensive and
relentless communication process
b) Senn launched multiple communication programs , including special events and regular
trainings.
c) Among the more successful communication initiatives was an internal contest to choose a
mascot that would symbolize the new strategy

d) To create a new high performance culture, we wanted to capture the employees hearts and
minds. BSC was the tool for the change

The Balanced Scorecard Gears Up

a) Hard and Soft data. 80% hard data, 20% from surveys from customers, employees and from
market assessments
b) A Matrix was developed that related each objective with a series of actions that once approved
by the head of the area were used to establish the goal setting plan for each employee of the
area.

Compensation and Recognition

a) Paying the workforce based on the BSC metrics. Even shop flor had their union aligned to this.
b) Recognizing employees beyond salary (internal project contest with over 2,200 projects)

Engaging Suppliers and Dealers with the BSC

a) VWB 550 supplies produced approximately 15,800 different components
b) A reliable process to manage quality, quantity, cost and timely delivery
c) More than 600 independent Auto dealers, largest network in Brazil
d) Extended training and recognition programs to its external partners (“Dealer Academy”)