Running head: Shanghai Volkswagen Case Analysis
Shanghai Volkswagen Case Analysis
LDR 660
Strategic Planning and Implementation
Rita L. Halasz
Siena Heights University
Professor Cynthia Jones
May 25, 2010
1
Running head: Shanghai Volkswagen Case Analysis
2
Table of Contents
Case Statement
3
Symptoms
4
Goals
5
Internal Environment
6
External Environment
7
Industry Analysis:
Change Model Formula
8
Changing Organizational Cultures
9
Financial Analysis
11
Ratio Analysis
12
Diagnosis
13
Action Plan
14
References
17
Appendix A
18
Appendix B
22
Appendix C
25
Running head: Shanghai Volkswagen Case Analysis
3
Case Statement
Shanghai Volkswagen Automotive Co, Ltd., (SVW), is ready for an organizational
culture change. A producer of Volkswagen automobiles in China, market share pressures and
the desire for efficiency and increased local resources have made them look closely at their
corporate culture and the way products are managed from idea through production and the
market place. The Electrical Engineering Division has been targeted to implement product
management and to make the changes necessary for its success.
SVW was formed from a joint venture between Volkswagen AG from Germany (VW),
and the state (China)-owned Shanghai Automotive Industry Corporation (SAIC) in 1985.
China requires foreign investors to enter joint ventures (JV) with no more than a 50% interest.
SAIC was a 50:50 JV, and Volkswagen was also part of the FAW VW joint venture, with First
Automotive Works, also a state- owned entity. VW’s joint ventures enabled Volkswagen to
produce and market cars in China, and China was able to capitalize on foreign investment and
increase local production. The SVW agreement was amended and restated in 2004 to continue
until 2030 (Kramer, Kaufmann & Becker, 2007).
SVW had been a leader in the Chinese automotive market. They had reached market
share of 50%. However, Kramer et al. (2007) note, “In the first half of 2003 it had dived down to
20.3 percent. As a reaction, Volkswagen increased its investment in China and began to focus
more on the sales and marketing side than before” (p. 312). In addition, SVW was looking to
shift more of its design and development work onsite in China, and away from Germany.
SVW’s Electrical Engineering Division (EE) had primarily procured Volkswagen AG
designed and tested parts from local suppliers. China requires that “forty percent of all value
creation has to be local content “ (Kramer et al., 2007, p.312). This requirement, coupled with
Running head: Shanghai Volkswagen Case Analysis
4
the potential to save money using low cost local suppliers, has provided increased incentive to
utilize the Chinese labor force and suppliers for more of the parts creation process. Kramer et al.
(2007) continue, “Local content would be increased not only to leverage local low-cost suppliers
but also to allow for quicker response times. Knowledge transfer no longer should be one-sided,
but in future more and more two-sided” (p. 319).
Coupled with the increased investment from Volkswagen AG, EE was “moving from a
replicating office to an electronics and electrics development unit” (Kramer et al., 2007, p. 308).
Project management implementation is desired so that EE can take the design and production of
parts through all phases. Significant corporate structural and cultural barriers were impeding this
process.
EE has been responsible for securing appropriate local suppliers and production of
quality parts .This group falls under Product Engineering, which in turn is part of Production and
Engineering. The number of engineers in EE was expected to grow by 50%. Their
responsibilities were numerous and they ultimately had responsibility over all parts related to
electronics (Kramer et al., 2007).
Symptoms
Although EE bore responsibility for all parts, many of them were designed in Germany.
Most testing took place in Germany and the Quality Management department was responsible
for quality control. Different phases of the development and production process would shift to
the control of various departments and divisions along the way, with the lead EE engineer still
absorbing responsibility. Many divisions took responsibility for different phases of part
production, thwarting project management by EE. This placed them at the mercy of these
divisions and left them little control over the development timeframe (Kramer et al., 2007).
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The inability to effectively manage projects also rested in cultural barriers. Kramer et al.
(2007) state, that SVW gave “the impression of walking through a miniature replication of VW
Wolfsburg in Germany. There was German food, most of the Chinese engineers spoke German,
and approximately 1/3 of upper management was German (p. 315). Although the facility and
that of Shanghai in general, were very westernized, there were still significant cultural
differences (Kramer et al., p. 316).
For Chinese, it is important to “keep their face”. It is important to always deliver an
answer, even if wrong, to always control one’s temper, and always treat and be treated according
to person’s social status. Politeness etiquette also prohibits saying “no”, and to not admitting
there is a misunderstanding or that something is not understood. A manager questioning an
engineer may hear “yes”, when in fact, the engineer is not planning on doing the work or doesn’t
understand the task (Kramer et al., 2007, p. 316).
Other differences include initiative, planning, and hierarchical communication gaps. Due
to the large control of the communist government, Chinese are used to being controlled and told
what to do, resulting in little initiative. Westerners are typically interesting in planning every
detail, part of the project management process (Kramer et al., 2007). Kramer et al., further notes,
“Chinese people tend to believe that things change constantly and life is unpredictable, which
makes long-term planning useless” (p. 317). This belief leads to taking projects in little pieces at
a time, as they arise. Project management, on the other hand, requires an understanding of the
big picture, and breaking it into controlled parts and processes. Finally, at SVW, due to a
combination of language gaps, peer familiarity, and cultural differences, German employees
would generally try to speak to other Germans, regardless of position or authority. Chinese
employees also preferred to talk with Chinese, or timidly use phone and e-mail to contact
Running head: Shanghai Volkswagen Case Analysis
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Germans. Orders are also rated according to the level of management that issues the order, and
German issues are rated higher than Chinese delegated tasks (Kramer et al).
Goals
Project management implementation was necessary at EE. Kramer et al., (2007)
observes, “Despite all efforts that had been undertaken, project management in EE was
functioning more on paper rather than in practice” (p. 318). Shanghai Volkswagen needed
reshaping and restructuring for faster response times and faster and more autonomous production
of parts to be successful (Kramer et al.). Mr. Sven Patuchka, head of EE summarized it well in
his discussion with Mr. Liang Sui, electrical engineer:
We need to change our structure in order to be able to react quicker to changes and
especially to be able to communicate more efficiently. Problems should be reported even
before they arise, so that we can react in time. Your task is to evaluate the possible
advantages and disadvantages of implementing project management in EE. Thereafter,
you should initiate all necessary actions in order to successfully implement project
management (Kramer et al., p. 308)
Internal Factors
Strengths:
Excellence in research, design, and testing in Germany
Leading foreign joint venture in China with highest market share
Joint venture approved through 2030
VW commitment to increased investment
Commitment to project management to increase efficiency
Weaknesses:
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Inability to address and correct problems due to Chinese culture barrier
Lack of Chinese initiative
Split of functions within project management between Germany and China
Lines of communication barriers between Chinese and Germans and management
levels
Lack of Electrical Engineering autonomy
Decline in market share
External Factors
Opportunities:
Inexpensive local suppliers
China’s declaration of automotive industry as one of five key industries
Joint venture competitors with successful cultural integration as models
Extensive and inexpensive Chinese labor pool for all levels of employment
Expansion of JV’s and auto industry will provide more local supplier choice
Cultural integration and project management will yield increase efficiency and
profits
Threats:
Competitors that have mastered project management and cultural integration
Lack of control over local suppliers
Entry of more JV’s (competitors)
Economy (current)
Chinese Government restrictions regarding local suppliers
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Change Analysis
Change Model Formula
The SWOT model looks at the internal and external factors of an organization. It is clear
from the SWOT, and the case itself, that significant changes will have to be made for the joint
venture to successfully implement project management. Gleicher’s Change Model Formula
states that:
Dissatisfaction x Vision x First Steps > Resistance to Change
All of the factors must be present so that when combined, they are greater than the resistance to
change. If a factor is at or near zero, the resistance to change will dominate (Gleicher, para. 1).
VW management is dissatisfied with the lack of successful project management. It is
also recognizes that cultural disparities account for a large portion of the problem. There is also a
desire by management to increase the responsibilities for projects within the JV’s environment,
versus Germany. Project management barriers will only be exacerbated by increasing design,
production, and testing within the Chinese location.
The Chinese employees appear not to recognize the issue based on the unused Gantt and
traffic lights charts and the fact that the project managers indicated they did not understand the
project management’s purpose. They perceived it as more work, but did not recognize any value
(Kramer et al., 2007). In order for the organization’s culture to change, the employees affected
must be dissatisfied, not just the management. VW, as a European company, understands project
management and operates under that model. They have the vision of what should be, but have
not been able to effectively communicate that vision to affected departments and employees.
The case brings us SVW at the First Steps portion of the Change Model. The company is
looking to implement change and wants to analyze the feasibility and success of this change.
Running head: Shanghai Volkswagen Case Analysis
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They want to know what steps to take. The key is that the steps need to be attainable and that
attainability needs to be communicated to the key players. If these steps do not appear to be
viable, lack of employee buy-in will again lower the factor of First Steps to zero or near zero,
which will further sustain the resistance to change.
Using the Change Model, VW needs to ensure that all players, and especially managers,
understand the issues and problems of the current situation, which they have not done in the past.
The desired result and vision, along with clear and perceived attainable steps towards realizing
that vision, need to be communicated effectively so that the employees’ resistance to change is
significantly reduced.
Changing Organizational Cultures Model
In order to bring about organizational change in SVW, a third analysis model is useful.
Beyer and Trice, in their Changing Organizational Cultures model, below, identify specific areas
to review during the change process. The eight areas and related SVW analysis are below:
Capitalize on Propitious Moments: SVW will need to utilize specific examples,
past and present, within the corporation, to raise the perception of a need for change
within affected departments. This could be specific examples of projects that failed, how
and why they failed, and how the new vision would have changed the outcome. It is
important to recognize the benefit to the company, due to the Chinese sense of loyalty to
their employer.
Combine Caution with Optimism: Good examples of successes in other areas of
the company or possibly competitors can create a positive outlook on change. Employees
need to understand how the change will benefit the company, clients, and the employees
Running head: Shanghai Volkswagen Case Analysis
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themselves. With initiative difficulties, it is best to again channel the optimism in light of
company benefits.
Understand Resistance to Culture Change: Western and Chinese culture are
very different and are ingrained. Working to implement change that respects the Chinese
culture is important for buy-in and success. Initiatives should incorporate Chinese
culture as much as possible. Cultural change is not overnight.
Change Many Elements, But Maintain Some Continuity: SVW will not be
able to eliminate all cultural influence and unique areas that have been successful should
be maintained. Finding processes and areas where the local employees have been very
successful utilizing their models or unique cultural attributes will be rewarding for the
employees and help them to accept change in dissatisfaction areas.
Recognize the Importance of Implementation As described in the Change
Model Formula, above, actually implementing, and with small, attainable, first steps, will
generate more acceptance and contribute to the success of the change. Beyer and Trice
state that “initial acceptance and enthusiasm are insufficient to carry change forward,”
and that adoption, followed by implementation, leads to institutionalization (section 6).
Current managers do not see the benefit of project management, so the initial
implementation and the expected success will be a motivating factor in its own right.
Select, Modify, and Create Appropriate Cultural Forms: Culture based
incentives and rituals will help to inspire and motivate the local employees to embrace or
try change while simultaneously rewarding them for their effort and successes.
Modify Socialization Tactics: Training programs: It is important that initial
training and integration of new employees sets the stage for the desired cultural
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integration and corporate culture. This takes time, but as new employees are socialized
according to the desired corporate culture, long term corporate culture will be affected.
Find and Cultivate Innovative Leadership: SVW needs to find dynamic
Chinese leaders who understand and can lead the change process. Training will also be
an important part of developing leaders, and in turn, good project management. A style of
management that is primarily Western-based will necessitate a new way of thinking and
an openness to change.
Financial Analysis
A review of Volkswagen AG’s Income Statements (Appendix A), shows that
VW’s revenue increased for each of the four years 2005-2008, with a significant decrease
in revenue of 8% in 2009. Cost of revenue and the resultant gross profits were consistent
with the changes in revenue. Even with the 2009 decrease in revenue, the company still
recorded net income of €960 million. Selling, general, and administrative expenses
remained constant between 2008 and 2009, indicating a lack of controlling costs during
the economic downturn. The 38% increase in interest expense for 2009 correlates with
the increase of debt levels (Appendix B).
VW’s Balance Sheet (Appendix B), indicates a decrease in cash for 2008, due to
an increase in receivables, followed by a 117% increase in 2009. This was due to the
increase in short and long-term debt, as noted above, the reduction of receivables, and the
increase in accounts payable. The company also had modest increases in property, plant,
and equipment for each of the five years. Inventory was reduced in 2009, which
demonstrates the company’s ability to control production costs and sell from inventory
stocks during a down year.
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Total debt fluctuated during the five year period, with overall reductions in 2006
and 2007, followed by two years of substantial increases. Equity was also consistent,
primarily reflecting increases due to net income.
Volkswagen AG was able to main consistent results during the past five year
period with a modest reduction in revenue in 2009. This was a year of economic
recession and automakers were particularly hard hit. In spite of this and unchanged
selling and administrative expenses, VW was able to recognize net income for 2009.
Ratio Analysis
Ratios for VW are found in Appendix C and will be analyzed within five areas: liquidity,
asset management, debt management, profitability, and equity.
VW’s quick ratio, a measure of liquidity and ability to pay current liabilities is .93 versus
.36 for the industry. Although a quick ratio of 1.0 or greater would be preferred, VW has the
ability to meet current obligations with little sales or liquidation of inventory. Inventory
turnover is 5.77, far above the 2.44 for the industry. This would indicate a very fast
turnaround of inventory; over double the industry average. VW is currently achieving good
liquidity.
In asset management, total asset turnover is .61, yielding good sales as a percentage of
assets. This is almost fourfold the industry average of .17. For debt management, no ratio
was given in Appendix C. The debt ratios calculated from Appendix B for the periods 20052009, show consistent and reasonable debt ratios of .46, .43, .4, .41, and .44, respectively.
This directly correlates to changes in property, plant, and equipment and debt levels during
those same periods.
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For profit margin, it is helpful to look at the five year average, since 2009 was a loss year
for the industry. VW’s five year profit margin was a respectable 2.42, but significantly less
than the industry average of 3.17. Estimates for the current period show a net profit margin
far above the industry average. Return on equity shows better results. Five year average is
8.77 for VW; 8.06 for industry, showing that their below industry profit margins are still
yielding good returns based on their level of equity.
For price earnings ratio, five year averages are not given for VW in Appendix C. Current
TTM estimates report a company P/E ratio of 24.08 with an expected industry P/E of 10.42.
Given the poor economy during the current period, VW has been able to attain a strong P/E
ratio.
Diagnosis
SVW has a typical vertical hierarchy, which supports Chinese authority structure.
However, project management is a horizontal approach, with key components and players across
similar authority lines. As Chen & Partington observe:
In Chinese culture larger power distance and stronger uncertainty avoidance are
associated with greater centralization and formalization. Organizations are usually taller,
more hierarchical pyramid structures. In contrast, Western organizational structures are
usually flatter with a less distinctive hierarchy. The Western approach to project
management usually involves a matrix of two competing hierarchies – a functional
hierarchy and a project hierarchy. This requires tolerance for ambiguity, which may not
fit the Chinese culture. Hence: Proposition 6. Chinese project managers will tend to be
reluctant to use the Western matrix project organizational structure (p. 3).
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Current project management has engineers taking full responsibility for projects, but
leaves a high degree of control within other divisions and departments, including Germany.
With culturally limited initiative, reliance on authority levels, and limited practical control,
project managers are uncomfortable in directing and managing their parts process through
leadership, direction, and delegation.
Chinese employees have not owned the benefits of project management; either because of
cultural traditions in managing work or the lack of successful results within SVW. Project
management is the discipline of organizing and managing resources (e.g. people) in such a way
that the project is completed within defined scope, quality, time and cost constraints
(Statemaster, 2009).
Chinese culture traditionally focuses on relationships during project work, with flexible
and changing schedules. Incremental steps are taken without an emphasis on planning, versus
the Western approach to analyzing the big picture and scope, and planning the steps to fit it.
“Project management methods in China relied primarily on ‘backward planning’” (Dodyk &
Briggs, p. 2).
Communication between the Chinese and Germans also functions too much based on
nationality instead of with the most direct and appropriate party. There is also an inability for the
Chinese to communicate problems, concerns, and misunderstandings due to the difficulties in
saying no, losing face, and communication with non-first tier authority.
Action Plan
The Change Model Formula will be crucial in the success of project management
implementation at SVW.
Dissatisfaction:
Running head: Shanghai Volkswagen Case Analysis

15
Educate employees to understand the consequences to the company when not
successfully utilizing project management.

Concretely outline how project management will tangibly benefit the company
and the employees involved.

Clearly describe ways in ways in which German counterparts have thwarted the
project management process, thereby emphasizing a company problem, and a
company solution
Vision:

Design a new structure of project management that all employees will follow..

The new structure should utilize as many unique cultural characteristics as
possible, as well as retain processes that have been successful.

Initial socialization of new employees should emphasize the new corporate
culture for project management only.

The new structure should be implemented company-wide and “sold” to all
employees utilizing culturally sensitive methods, with enthusiasm and optimism.

The vision also needs to be transmitted through charismatic managers and
employees that understand the concepts and can support and encourage coworkers through positive leadership.
First Steps:

Restructure initial training and socialization of new employees for long-term
corporate culture change.

Implement training for Chinese project managers on site in Germany to build
long-term attitudes and understanding.
Running head: Shanghai Volkswagen Case Analysis

16
Research and begin implementation of software and other management systems to
give project managers to learn and do their job more effectively.

Analyze the authority structures within SVW and make appropriate changes to
give project managers the authority to control and run their projects.

Implement culturally appropriate rewards for good project management and
communication, as well as successful completion of projects.

Analyze where possible deterrents to good communication and problem solving
exist and seek to eliminate those barriers and implement incentives.

Look to where project management methods can be implemented in other
processes, divisions, and departments within the company, in order to saturate the
organizational culture.
Shanghai Volkswagen has been a leader within the Chinese automotive market. The
industry is growing and has a bright future in China through the Chinese Government’s targeting
of the industry for growth and enhancement, as well as the growing Chinese market for cars.
SVW, through its successful implementation of project management, and resultant increased
efficiency, is poised to be the leader in the future.
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References
Beyer, H., Trice, J. (1993). Changing Organizational Cultures. Retrieved from:
http://valuebasedmanagement.net.
Chen, P., Partington, D. How culture sensitive is project management? Retrieved from
http://www.zulanas.lt/images/adm_source/docs/2Ping_Chen_paperENG.pdf
Dodyk, P., Briggs, P. Understanding the Project Management Process in China. Retrieved from
http:// www.pmi.org/PDF/pp_dodyk.pdf
Gleicher, D. (1987). Change Model Formula. Retrieved from:
http://valuebasedmanagement.net.
Kramer, B., Kaufmann, L., Becker, A. (2007). Shanghai Volkswagen: Implementing
Project Management in the Electrical Engineering Division. In Strategic
Management, Competitiveness and Globalization: Concepts and Cases (pp. 116124). Ohio: Thomson South-Western.
Statemaster, Retrieved from: http://www.statemaster.com
Running head: Shanghai Volkswagen Case Analysis
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Appendix A
VOLKSWAGEN AG INCOME STATEMENTS
2005
2009
2008
2007
2006
2005-12-31
2009-12-31 2008-12-31 2007-12-31 2006-12-31 Restated
In Millions of Euro Period Len Period Len Period Len Period Len 2006-12-31
(except for per
gth
gth
gth
gth
Period Len
share items)
12 Months 12 Months 12 Months 12 Months
gth
12 Months
Revenue
105,187.0
113,808.0
108,897.0
104,875.0
93,996.0
Other Revenue, Total --
--
--
--
--
Total Revenue
105,187.0
113,808.0
108,897.0
104,875.0
93,996.0
Cost of Revenue,
Total
91,608.0
96,612.0
92,603.0
91,020.0
81,733.0
Gross Profit
13,579.0
17,196.0
16,294.0
13,855.0
12,263.0
Selling/General/Admi
13,276.0
n. Expenses, Total
13,294.0
11,727.0
11,492.0
10,853.0
Research &
Development
--
--
--
--
--
Depreciation/Amortiz
-ation
--
--
--
--
Interest Expense, Net
-- Operating
--
--
--
--
Interest/Investment
Income - Operating
--
--
--
--
--
Interest
Expense(Income) Net Operating
--
--
--
--
--
Unusual Expense
(Income)
(38.0)
30.0
(47.0)
--
--
Other Operating
Expenses, Total
(1,514.0)
(2,461.0)
(1,537.0)
354.0
(1,128.0)
Total Operating
Expense
103,332.0
107,475.0
102,746.0
102,866.0
91,458.0
Running head: Shanghai Volkswagen Case Analysis
Operating Income
1,855.0
19
6,333.0
6,151.0
2,009.0
2,538.0
Interest Expense, Net
(2,268.0)
Non-Operating
(1,815.0)
(1,647.0)
(1,586.0)
(1,531.0)
Interest/Invest
Income - NonOperating
2,385.0
1,710.0
1,211.0
679.0
Interest Income(Exp),
-Net Non-Operating
--
--
--
--
Gain (Loss) on Sale
of Assets
--
--
--
--
--
Other, Net
234.0
(295.0)
329.0
159.0
(65.0)
Net Income Before
Taxes
1,260.0
6,608.0
6,543.0
1,793.0
1,621.0
Provision for Income
349.0
Taxes
1,920.0
2,421.0
(162.0)
571.0
Net Income After
Taxes
911.0
4,688.0
4,122.0
1,955.0
1,050.0
Minority Interest
49.0
65.0
(2.0)
(1.0)
0.0
Equity In Affiliates
--
--
--
--
--
U.S. GAAP
Adjustment
--
--
--
--
--
Net Income Before
Extra. Items
960.0
4,753.0
4,120.0
1,954.0
1,050.0
Accounting Change
--
--
--
--
--
Discontinued
Operations
--
--
0.0
795.0
70.0
Extraordinary Item
--
--
--
--
--
Tax on Extraordinary
-Items
--
--
--
--
Net Income
960.0
4,753.0
4,120.0
2,749.0
1,120.0
Preferred Dividends
--
--
--
--
--
General Partners'
Distributions
--
--
--
--
--
Miscellaneous
--
--
--
--
--
1,439.0
Running head: Shanghai Volkswagen Case Analysis
20
Earnings Adjustment
Pro Forma
Adjustment
--
--
--
--
--
Interest Adjustment -Primary EPS
--
--
--
--
Income Available to
Com Excl ExtraOrd
960.0
4,753.0
4,120.0
1,954.0
1,050.0
Income Available to
Com Incl ExtraOrd
960.0
4,753.0
4,120.0
2,749.0
1,120.0
Basic Weighted
Average Shares
400.20
398.09
394.34
387.76
384.36
Basic EPS Excluding
2.399
Extraordinary Items
11.939
10.448
5.039
2.732
Basic EPS Including
2.399
Extraordinary Items
11.939
10.448
7.089
2.914
Dilution Adjustment
--
--
--
--
--
Diluted Weighted
Average Shares
400.29
399.70
397.73
389.76
384.36
Diluted EPS
Excluding ExtraOrd
Items
2.398
11.891
10.359
5.013
2.732
Diluted EPS Including
2.398
ExtraOrd Items
11.891
10.359
7.053
2.914
DPS - Common Stock
1.600
Primary Issue
1.930
1.800
1.250
1.150
Gross Dividends Common Stock
647.0
779.0
720.0
497.0
450.0
Total Special Items
(38.0)
30.0
(47.0)
0.0
0.0
Normalized Income
Before Taxes
1,222.0
6,638.0
6,496.0
1,793.0
1,621.0
Effect of Special
Items on Income
Taxes
(10.5)
8.7
(17.4)
0.0
0.0
1,928.7
2,403.6
(162.0)
571.0
Inc Tax Ex Impact of
338.5
Sp Items
Running head: Shanghai Volkswagen Case Analysis
Normalized Income
After Taxes
21
883.5
4,709.3
4,092.4
1,955.0
1,050.0
Normalized Inc. Avail
932.5
to Com.
4,774.3
4,090.4
1,954.0
1,050.0
Basic Normalized
EPS
2.330
11.993
10.373
5.039
2.732
Diluted Normalized
EPS
2.330
11.944
10.284
5.013
2.732
Retrieved from: http://www.reuters.com/finance/stocks/financialHighlights?symbol=VLKAF.PK
Running head: Shanghai Volkswagen Case Analysis
22
Appendix B
Volkswagen Ag Balance Sheets
In Millions of Euro
(except for per share items)
2009
2008
2007
2006
2005
2009-12- 2008-12- 2007-12- 2006-12- 2005-1231
31
31
31
31
Cash
--
--
Cash & Equivalents
20,539.0 9,474.0
10,112.0 9,367.0
7,963.0
Short Term Investments
3,330.0
6,615.0
4,017.0
Cash and Short Term
Investments
23,869.0 13,244.0 16,727.0 14,458.0 11,980.0
Accounts Receivable - Trade,
Net
5,692.0
Notes Receivable - Short Term
27,403.0 27,035.0 24,914.0 23,426.0 22,412.0
Receivables - Other
6,689.0
Total Receivables, Net
39,784.0 44,096.0 37,758.0 34,308.0 33,223.0
Total Inventory
14,123.0 17,816.0 14,031.0 12,463.0 12,643.0
Prepaid Expenses
--
--
--
--
--
Other Current Assets, Total
0.0
1,007.0
0.0
--
--
Total Current Assets
77,776.0 76,163.0 68,516.0 61,229.0 57,846.0
3,770.0
5,969.0
--
5,691.0
11,092.0 7,153.0
--
5,091.0
5,049.0
5,833.0
--
5,638.0
5,173.0
Property/Plant/Equipment, Total 85,198.0 79,746.0 73,928.0 71,508.0 70,872.0
Gross
Accumulated Depreciation, Total (60,755.0) (56,625.0) (54,590.0) (51,168.0) (47,988.0)
Property/Plant/Equipment, Total 24,443.0 23,121.0 19,338.0 20,340.0 22,884.0
Net
Goodwill, Net
--
Intangibles, Net
--
201.0
195.0
238.0
12,907.0 12,291.0 6,629.0
6,998.0
7,430.0
Long Term Investments
11,144.0 7,106.0
7,439.0
4,701.0
Note Receivable - Long Term
37,606.0 36,005.0 30,890.0 29,478.0 27,228.0
8,495.0
Running head: Shanghai Volkswagen Case Analysis
23
Other Long Term Assets, Total
13,301.0 13,233.0 11,288.0 10,924.0 12,754.0
Other Assets, Total
--
Total Assets
177,177.0 167,919.0 145,357.0 136,603.0 133,081.0
Accounts Payable
10,225.0 9,676.0
9,099.0
8,190.0
8,476.0
Payable/Accrued
--
--
--
--
--
Accrued Expenses
--
--
--
--
--
--
--
--
--
Notes Payable/Short Term Debt 40,583.0 36,091.0 28,656.0 30,007.0 30,893.0
Current Port. of LT Debt/Capital
23.0
Leases
32.0
21.0
16.0
99.0
Other Current liabilities, Total
18,703.0 19,003.0 18,292.0 15,272.0 13,841.0
Total Current Liabilities
69,534.0 64,802.0 56,068.0 53,485.0 53,309.0
Long Term Debt
36,810.0 33,081.0 29,122.0 28,534.0 30,833.0
Capital Lease Obligations
183.0
Total Long Term Debt
36,993.0 33,257.0 29,315.0 28,734.0 31,014.0
Total Debt
77,599.0 69,380.0 57,992.0 58,757.0 62,006.0
Deferred Income Tax
2,224.0
3,654.0
2,637.0
2,154.0
1,622.0
Minority Interest
2,149.0
2,377.0
63.0
55.0
47.0
Other Liabilities, Total
30,998.0 28,818.0 25,399.0 25,271.0 23,489.0
Total Liabilities
141,898.0 132,908.0 113,482.0 109,699.0 109,481.0
Redeemable Preferred Stock,
Total
--
--
--
--
--
Preferred Stock - Non
Redeemable, Net
--
--
--
--
--
Common Stock, Total
1,025.0
1,024.0
1,015.0
1,004.0
1,093.0
Additional Paid-In Capital
5,356.0
5,351.0
5,142.0
4,942.0
4,513.0
176.0
193.0
200.0
181.0
Retained Earnings (Accumulated
28,901.0 28,636.0 25,718.0 20,958.0 17,994.0
Deficit)
Treasury Stock - Common
--
--
--
--
--
ESOP Debt Guarantee
--
--
--
--
--
Unrealized Gain (Loss)
--
--
--
--
--
Running head: Shanghai Volkswagen Case Analysis
24
Other Equity, Total
--
--
--
--
--
Total Equity
35,282.0 35,011.0 31,875.0 26,904.0 23,600.0
Total Liabilities & Shareholders'
177,180.0 167,919.0 145,357.0 136,603.0 133,081.0
Equity
Shares Outs - Common Stock
Primary Issue
295.01
294.92
291.34
286.98
280.21
Shares Outstanding - Common
Issue 2
105.87
105.87
105.87
105.87
105.87
Shares Outstanding - Common
Issue 3
--
--
--
--
--
Shares Outstanding - Common
Issue 4
--
--
--
--
--
Total Common Shares
Outstanding
400.88
400.79
397.21
392.85
386.08
Retrieved from: http://www.reuters.com/finance/stocks/financialHighlights?symbol=VLKAF.PK
Running head: Shanghai Volkswagen Case Analysis
25
Appendix C
Ratios
EARNINGS (per share)
Quarter Ending Jun-10
1
0.93
0.93
0.93
--
Quarter Ending Sep-10
1
0.84
0.84
0.84
--
Year Ending Dec-10
15
4.23
8.01
3.01
5.46
Year Ending Dec-11
15
6.92
11.70
2.68
8.88
LT Growth Rate (%)
2
48.10
69.00
27.20
22.70
a.
Sales and Earnings Figures in U.S. Dollars (USD)
B.
VALUATION RATIOS
Company
Industry
Sector
S&P 500
24.08
10.42
19.67
19.62
P/E High - Last 5 Yrs.
--
0.04
0.23
57.55
P/E Low - Last 5 Yrs.
--
0.01
0.05
5.85
-0.18
0.97
1.00
1.36
Price to Sales (TTM)
0.28
0.16
2.00
1.98
Price to Book (MRQ)
0.79
0.34
2.91
2.44
Price to Cash Flow (TTM)
3.05
1.82
9.26
21.78
Price to Free Cash Flow (TTM)
6.26
2.98
21.10
22.80
P/E Ratio (TTM)
Beta
Running head: Shanghai Volkswagen Case Analysis
% Owned Institutions
26
--
--
--
--
Company
Industry
Sector
S&P 500
Dividend Yield
2.38
0.93
1.17
1.68
Dividend Yield - 5 Year Avg.
1.27
1.49
1.39
2.68
Dividend 5 Year Growth Rate
8.79
-0.40
1.40
-9.36
57.72
13.61
10.38
32.93
Company
Industry
Sector
S&P 500
Sales (MRQ) vs Qtr. 1 Yr. Ago
19.37
11.72
10.04
13.25
Sales (TTM) vs TTM 1 Yr. Ago
-0.87
-2.29
-1.46
6.61
3.41
8.06
7.07
6.11
EPS (MRQ) vs Qtr. 1 Yr. Ago
59.64
40.43
78.83
223.52
EPS (TTM) vs TTM 1 Yr. Ago
-72.69
--
--
--
5.84
-0.55
-0.52
7.07
-2.53
4.01
3.32
8.39
Sector
S&P 500
D.
Payout Ratio(TTM)
F.
Sales - 5 Yr. Growth Rate
EPS - 5 Yr. Growth Rate
Capital Spending - 5 Yr. Growth Rate
G.
C.
DIVIDENDS
E.
GROWTH RATES
FINANCIAL STRENGTH
Company
Industry
Running head: Shanghai Volkswagen Case Analysis
27
Quick Ratio (MRQ)
0.93
0.33
0.65
0.79
Current Ratio (MRQ)
1.15
0.39
0.79
0.95
LT Debt to Equity (MRQ)
101.33
19.57
23.65
134.30
Total Debt to Equity (MRQ)
197.05
35.02
38.86
201.19
--
-0.01
0.10
42.32
Interest Coverage (TTM)
H.
PROFITABILITY RATIOS
Company
Industry
Sector
S&P 500
Gross Margin (TTM)
13.80
4.31
5.85
30.29
Gross Margin - 5 Yr. Avg.
13.89
21.27
23.70
27.42
EBITD Margin (TTM)
10.46
--
--
--
EBITD - 5 Yr. Avg
9.77
9.30
10.14
14.82
Operating Margin (TTM)
2.18
0.53
1.06
--
Operating Margin - 5 Yr. Avg.
3.59
4.62
5.27
16.98
Pre-Tax Margin (TTM)
1.74
0.63
0.99
13.85
Pre-Tax Margin - 5 Yr. Avg.
3.38
4.57
5.08
16.61
Net Profit Margin (TTM)
1.04
0.39
0.63
10.93
Net Profit Margin - 5 Yr. Avg.
2.42
3.17
3.38
12.17
Running head: Shanghai Volkswagen Case Analysis
28
Effective Tax Rate (TTM)
40.27
9.53
9.94
11.03
Effecitve Tax Rate - 5 Yr. Avg.
28.61
29.69
33.51
25.74
Company
Industry
Sector
S&P 500
298,060
112,708
1,358,625
581,179
Net Income/Employee (TTM)
3,099
1,395
89,419
68,633
Receivable Turnover (TTM)
15.46
2.30
3.19
8.13
Inventory Turnover (TTM)
5.77
2.44
2.64
6.25
Asset Turnover (TTM)
0.61
0.17
0.19
0.50
i.
J.
Revenue/Employee (TTM)
K.
EFFICIENCY
MANAGEMENT EFFECTIVENESS
Company
Industry
Sector
S&P 500
Return on Assets (TTM)
0.63
0.25
0.44
5.24
Return on Assets - 5 Yr. Avg.
1.73
2.77
3.16
5.28
Return on Investment (TTM)
1.05
0.39
0.63
6.72
Return on Investment - 5 Yr. Avg.
2.86
5.37
5.73
6.78
Return on Equity (TTM)
3.01
0.87
0.84
14.67
Return on Equity - 5 Yr. Avg.
8.77
8.06
7.93
10.16
Retrieved from: http://www.reuters.com/finance/stocks/financialHighlights?symbol=VLKAF.PK