With Volkswagen looking to save 5 billion euros in costs at its core VW brand and key wage negotiations with its German workforce just starting, is it sensible to use shareholder money to subsidize a soccer club’s ambitions for a top-flight title?
Carmakers love soccer as a marketing platform for their brands -- just think of the $559 million Chevrolet is spending to have its bowtie emblazoned on the jersey of Manchester United players for seven years even though the English team is not competing this season in the all-important UEFA Champions League and Chevrolet is exiting Europe.
Now VW-owned FC Wolfsburg has just agreed to pay a reported 32 million euros to sign winger Andre Schuerrle from the top English team Chelsea. Schuerrle’s best moments on the soccer pitch include an assist that helped Germany’s Mario Goetze score the winning goal in the 2014 World Cup final in Brazil.
The Schuerrle payment would be a record for Wolfsburg and the third most expensive transfer in the German Bundesliga’s history, according to the soccer enthusiasts’ website Transfermarkt. Only FC Bayern Munich has ever splashed out more for a player.
Since Felix Magath’s team brought home the one and only German championship title for Wolfsburg in 2009, VW CEO Martin Winterkorn has forked out 216 million euros trying to turn the “gray mouse” of the Bundesliga into a contender once more.
According to the sport magazine Kicker, that’s only 100 million less than Bayern Munich spent over the same period -- prior to Schuerrle joining.
There are many cases where sports sponsorship is legitimately backed up by a solid business case. Wolfsburg, on the other hand, barely has any fans outside of the north German city that is home to VW’s global headquarters, let alone in the rest of Europe.
With spending so high at a club with no international following and limited revenue streams, European soccer governing body UEFA has launched investigations into Wolfsburg for possible violations of its Financial Fair Play rules.
Less than 48 hours after the club splurged on Schuerrle, VW brand executives read out a catalog of “pronounced risks” to its 115,000 strong German workforce during wage negotiations that started on Wednesday -- everything from rising technology costs and unemployment in southern Europe, through volatile currencies, emerging Asian competitors and all the way to crises in Russia, Brazil and Argentina.
“More than ever before, this means that we need to keep costs under control," said Martin Rosik, VW brand personnel boss, in a statement that day.
That warning sounds a lot less credible after last week’s marquee signing at Wolfsburg.