According to, CEO of Volkswagen North America Stefan Jacoby, the German company needs to get a lot more “local” in order to be competitive in the U.S. market. Part of that will be through the new plant under construction in Chattanooga, TN, and the two vehicles that will start rolling out of its doors in 2012.
During a media roundtable session last week, Jacoby and his executive team laid out some of Volkswagen Group’s North American goals, product plans, and obstacles that have to be overcome in order for the company to reach its goal of selling 10 million vehicles worldwide by 2018. Evidently, the company thinks the U.S. market should play a bigger role.
Even though sales for January through July 2009 are down 13.5 percent compared with 2008 (117,598 vs. 135,966), U.S. market share is up 25 percent, at 2.1 percent through July 2009 compared with 1.4 percent in 2008.
In order to really grow, both Jacoby and his staff explained that VW has to move into new segments where they currently aren’t competitive.
VW has recently entered two segments--small SUV (
Tiguan) and minivan (
Routan)--that they were never been before (not counting the EuroVan which was not quite a minivan but not a full-sized van, either). The lack of vehicles in those segments meant they lost customers who were looking to buy in those categories.
But there are still several segments here where VW lacks an entry. They’re working to fill those holes. Subcompacts, for example, are another segment where they still don’t compete in North America. Look for a vehicle that is similar in size to the tiny Volkswagen Polo, but don’t expect the exact same car as the one sold in Europe. As Jacoby said, “American consumers need bigger vehicles than European customers.” There is some truth to this: American family size is larger than those in Europe (not sure if he meant because of children or Big Macs), and there is a greater dependency on cars in the United States. In addition, a U.S.-built, seven-passenger SUV will be offered to take on the Honda Pilot and Toyota Highlander.
The Passat replacement, a Honda Accord/Chevrolet Malibu/Toyota Camry mid-sized sedan competitor built in Chattanooga, will go on sale for the 2012 model year. A replacement for the current Jetta will be built in the Pueblo, Mexico factory. The current versions are more expensive than their competitors in the segment, but their replacements will be less expensive. One goal is for 85 percent of the content for the Chattanooga-produced vehicle to be sourced from local suppliers. Jacoby said 2,000 workers will be employed at the factory.
Look for a Touareg 2 hybrid to be introduced next year, to go along with the diesel Touareg already on sale. The Tiguan’s successor will be priced lower than the current model to be more cost competitive with the sales-leading Honda CR-V. A next-generation Phaeton luxury sedan will return to the market, and, while nobody would confirm it, the Bluesport roadster concept does have a lot of internal interest and support to bring it to the market. And the New Beetle line will continue, with a redesign in the near future.
Finally, the Routan minivan will run for at least as long as the contract with Chrysler Corporation is in effect. Although selling in much less volume than the industry leaders, the Routan has been one way VW has retained some family-focused customers despite their lack of a seven-passenger SUV offering. The 2010 model will be repositioned to compete more directly with the Honda Odyssey, with fewer variations and materials highlighting what VW feels are the vehicle’s competitive advantages.
Cutting back on the number of vehicle build variations shows VW moving toward a more Asian-style selection system for the U.S. market. Where in 2007 there were nearly 4,000 total VW build combinations, there are just 1,151 combinations for 2010, not including color choices. The goal, we were told, is to move to a system where buyers choose a trim level, without any factory options. Personalization of a vehicle will take place at the port or the dealership. Sounds a lot like Honda.
Cutting down on the number of versions built may also have the effect of improving reliability; one area Volkswagen has traditionally faired poorly is in Consumer Reports
reliability survey data. One reason people leave the brand is because of reliability and product quality, though Jacoby says that warranty costs have been cut by nearly 50 percent. But the meeting also showed that there is a distinct opinion among the VW executives that customers don’t understand how some controls or features work in the vehicles, which, they said, results in low scores in some J.D. Power surveys. (Consumer Reports reliability surveys look at true problems that require repair.) We’ll see if VW has made progress when we publish our latest analysis this fall.
And, if it becomes more “local” perhaps it will drop the “Das Auto” tag line which, to most people, means nothing.
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Jon Linkov
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