HapticSimian
Honorary Master
The story I heard was that VW SA did not want to position SEAT as a budget alternative to VW because they were scared that SEAT would cannibalize the Polo/Mk1 Golf market so they positioned it as a premium brand and priced them too high. The cars didn't sell so VW SA turned to VW HQ said “We told you so.“. Since the brand was making a loss VW HQ had to allow VW SA to drop SEAT.
SEAT would never have been a threat to VW's own sales - in all the time I spent with SEAT I think I traded in 2 VWs on SEATs - they appeal to very, very different demographics even if they are essentially the same under the skin. The opposite was more likely to be true; SEAT drew people to the VW group that wouldn't normally even have considered buying a VW product - people with Alfas, FIATs, and other comparatively odd-ball cars. And even if the odd VW buyer did convert to SEAT, it was still money into VWSA's pocket.
Nah, I don't think that was ever really a concern. It was probably little more than a badly researched, marketed and supported venture.