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Volkswagen may leave United States

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Can VW Finally Find Its Way In America?
A last-ditch drive must correct disastrous turns to make the U.S. profitable again
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Link to Original Article @ Business Week


Volkswagen's (VLKAY ) experience in the U.S. has always been one of highs and lows. But rarely have its fortunes sunk so low as now. Less than a decade ago, the quirky reinvented Beetle helped VW come roaring back from a previous crisis. But for the past three years, its U.S. operations have lost close to $1 billion annually.

Now it's trying again to save the brand in the U.S. To head U.S. operations, it's bringing in Stefan Jacoby, a German with close ties to VW Chairman Martin Winterkorn and Supervisory Board Chairman Ferdinand K. Piëch, who took control of the company this year after a shakeup that left Porsche as VW's controlling shareholder. Jacoby, 49, an accountant by training, made his mark as head of VW's global sales and marketing. Since Jacoby took charge, the company boosted its European market share to 20.3% from 18.1%, helping keep it solidly in place as the Continent's leading brand. With its U.S. fortunes in long-term decline, Jacoby is facing his biggest challenge yet. His mission: to meet Winterkorn's target of breaking even in the U.S. by 2009.

Only a year ago, VW was gearing up a huge marketing campaign to relaunch a revamped Rabbit and Jetta in a bid to recapture its niche as the affordable, stylish European car of choice for younger buyers. VW hired former MiniUSA marketing chief Kerri Martin, who recruited super-hot U.S. ad agency Crispin Porter + Bogusky. The plan, as chronicled in a BusinessWeek cover story (May 22, 2006), was to create a VW renaissance.

It didn't work out that way. A string of attention-grabbing ads—one campaign showed people surviving crashes unscathed and another starred a German dominatrix named Helga—did little to juice sales of VW's two most important models, the Jetta and the Passat. "I've never seen a brand struggle so hard to understand the U.S. market and fail so miserably," says Rebecca Lindland, a director at consulting firm Global Insight Inc. VW's sales slid to 235,000 last year, from 338,000 in 2002. Martin left last December, part of a shakeup when Porsche took over.

Making matters worse is the perception in the U.S. that VW's quality lags vs. its Japanese rivals. VW's interiors, for example, don't stand up to the kind of abuse they get from U.S. drivers, who do a lot more eating, drinking coffee, and applying makeup in their cars than Europeans do. That's one factor in J.D. Power & Associates Inc. (MHP ) ranking VW in the bottom 20% for reliability, quality, and service. "That really hurts VW when its young customer base does so much online comparative shopping," says Power Information Network analyst Tom Libby.

To turn operations around, Jacoby has to battle the punishingly high euro and VW's limited manufacturing presence in North America. Even more important, the company needs to introduce new models that build on its long tradition of quirkiness and connect with U.S. consumers. Instead, the carmaker's more recent offerings feel bland. Dealers think VW blew a golden opportunity when it chose not to introduce an updated version of the wildly popular Microbus from the '60s and '70s. Instead, the company is launching a repackaged, Volkswagen-branded, Chrysler (DCX ) minivan. Casey Gunther, VW's top-selling U.S. dealer, in Coconut Creek, Fla., is worried. "We're missing the funkiness" that U.S. buyers expect from VW, he says. "The Germans don't understand." And unlike in Europe, affluent buyers don't see VW as an aspirational brand.

Winterkorn vows the turnaround of the U.S. business is his "No. 1 priority." But there's only so long any management can put up with nearly $1 billion annual losses. Says one executive close to VW: "For the first time in some time, the phrase If we are to stay in the U.S.' precedes a lot of conversations at VW."
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I'm not at all surprised. My ex was a total VW nut and even he didn't get at all excited about any of the new VWs. He liked the Pheaton for it's interior... and that was about it.

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Given the quality of what they build...good riddance.

Chris

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One problem I find is that, while their cars are handsome, they are boring as hell. Other European brands have at least a few interesting styling cues (take the taillights and the interior in an Opel Astra, for example) while VW has none. They need to focus on making all of their cars sporty while being original and funky. The new Scirocco needs to be here. Why couldn't they build a car similar in spirit to the Porsche 924/944/968 models, rear-drive and all. And the Beetle is just way too cute to cut it.

There also needs to be less overlap with Audi and VW and they need to set down specific styling for each brand. In some respects, one could confuse a Passat for a A6 and vice versa.

I'd like for VW to stay Stateside. European cars always were more or just as interesting to me as an American car in a few ways, mainly because they are sort of uncommon. However, I must say this news doesn't surprise me one bit.

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That's a cute thread title....but we all know that's not gonna happen. Neither Volkswagen nor any brand in its portfolio in this market is going anywhere. They're not Renault or PSA, they're too firmly entrenched in America to seriously consider leaving.

It is definitely true that they can't make the conservative stuff, that's just not the VW business in the US. They've gotta be the car you look at and think "hmmmm....interesting" (like people are currently doing with Scions--tell me folks wouldn't have gone wild if the xB was a Volkswagen at the right price).

Edited by LosAngeles
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One problem I find is that, while their cars are handsome, they are boring as hell. Other European brands have at least a few interesting styling cues (take the taillights and the interior in an Opel Astra, for example) while VW has none. They need to focus on making all of their cars sporty while being original and funky. The new Scirocco needs to be here. Why couldn't they build a car similar in spirit to the Porsche 924/944/968 models, rear-drive and all. And the Beetle is just way too cute to cut it.

There also needs to be less overlap with Audi and VW and they need to set down specific styling for each brand. In some respects, one could confuse a Passat for a A6 and vice versa.

I'd like for VW to stay Stateside. European cars always were more or just as interesting to me as an American car in a few ways, mainly because they are sort of uncommon. However, I must say this news doesn't surprise me one bit.

Agreed.

I also think they need to go back to the feel that the previous generation models had. The Mk IV Jetta and Golf are a favorite of mine. The current offerings are downgrade in design, IMO.

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Edited by blackviper8891
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I don't really know what to say about this one, from what I've seen with VW, its been a crapshoot when it comes to the quality, and in most cases, they are a little boring when it comes to their design and style. Otherwise, I've heard some good things, but I've also heard an assload of bad things too. Maybe it would be a good idea for them to get out of the market for a while and reinvent themselves (like said above, differentiate themselves more from Audi).

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I happen to really like the current VWs for thier content and pricing. The features are better than the Japanese rivals, and at least when you crash a VW, you have a chance of Surviving. Beetle, Jetta, Passat...all 5 star crash ratings. Sure, they may be less exciting than many other cars out there, but they are a lot better than any Japanese car this side of the Mazdas. I really have not heard anything bad about the reliability- all of ours were bullet-proof.

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Good news!

I spent far too much time in a passat last winter- besides being a bore-fest, it fell totally short of the 'VW hype' and had some really strange ergonomics.

I'm disappointed that this article failed to bring up VW's market performance peaked almost 40 years ago and has fallen ever since, instead picking the very recent year of 2002, as if it's only been a few years of trouble.

Ironic- tho I'm far from a VW fan, their recent funky ads and the current Golf finally were catching my eye.

>>"...we all know that's not gonna happen. Neither Volkswagen nor any brand in its portfolio in this market is going anywhere... they're too firmly entrenched in America to seriously consider leaving."<<

Ever hear of a little outfit called Oldsmobile? And they weren't losing anything close to the cash VW has been bleeding for years (Olds was still profitable in 2000 when the discontinuance was announced).

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Making matters worse is the perception in the U.S. that VW's quality lags vs. its Japanese rivals. VW's interiors, for example, don't stand up to the kind of abuse they get from U.S. drivers, who do a lot more eating, drinking coffee, and applying makeup in their cars than Europeans do.

Funny, my friend who had a new beetle did nothing but drive it and the interior was peeling like a bad sunburn two minutes after the warranty ran out. Add in the power window switches that snapped off in her hands, the glovebox door that seized up (they wanted $700 to fix it so it stays closed to this day) and the magic-self-staining seats and you have a disaster of an interior. Which would have been only annoying if the damned pile of crap didn't go through 3 clutches, 2 radiators in 90k miles, now has a shifter that feels like it's seated in warm butter and it eats brake pads like they were M&M's.

But it's our fat American latte swilling asses that are the problem.... :rolleyes:

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>>"...we all know that's not gonna happen. Neither Volkswagen nor any brand in its portfolio in this market is going anywhere... they're too firmly entrenched in America to seriously consider leaving."<<

Ever hear of a little outfit called Oldsmobile? And they weren't losing anything close to the cash VW has been bleeding for years (Olds was still profitable in 2000 when the discontinuance was announced).

Exiting a market and FOLDING a brand completely are two different things.
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Ever hear of a little outfit called Oldsmobile? And they weren't losing anything close to the cash VW has been bleeding for years (Olds was still profitable in 2000 when the discontinuance was announced).

Unfortunately, that just isn't true. Oldsmobile had been unprofitable for several years. Here's a link to GM's published official statement:

Detroit, Mich. - GM announced today that the Oldsmobile Division will be phased out over the next few years.

In making the announcement, GM President and Chief Executive Officer Rick Wagoner and Executive Vice President and President North America Ron Zarrella said that despite major investments over the past few years that resulted in critically acclaimed new Oldsmobile products, the division was still unprofitable and its sales volume continued to erode.

Here's another link to an article full of information on Oldsmobile:

The industry sales trend meant that Oldsmobile's sales and market share plunged steadily for well over a decade, dropping to only 265,878 vehicles sold in the first 11 months of this year, representing only 1.6 percent of the U.S. market. By comparison, in 1985 the brand sold 1.1 million U.S. vehicles, or 7 percent of that market.

The sales are even weaker than those numbers suggest, said David Healy, analyst with Burnham Securities. He said about half the sales are lower-profit fleet sales to companies or to GM employees at a discount. He said the elimination of the Oldsmobile brand was inevitable.

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Isn't that number for Olds actually higher than what Buick or Pontiac are doing these days? I know it way higher than Saab.

Olds actually had a more complete lineup in 2000 than Pontiac or Buick have today.

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Every single one that we have had in our dealership has had serious problems. Even the VW's that were only a few years old (that was most of them). Buttons and seat leather cracking, parts falling off, panel separation, etc.. These things are pieces of $%&t. I still have a soft spot for them though, and I hope they don't leave the USA. :(

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I will give VW props where props are due. Their V6es, both the standard ones and the VR models, are the smoothest 6 cylinder engines this side of BMW.

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I'd hate to see VW leave. I love'em especially when they have the rack on the roof. In fact I think they're possibly the only vehicles on the road that look good with a rack on top. I must agree with BV, the Mk IV Jetta is possibly the best designed Jetta ever! The new Golf/Rabbit looks great IMO. Anyway, I hope they straighten this out and fast.

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The big problem is VW is still considered a cheap car in this country while they have gone upscale in Europe. We look at them as a whole different car here and that is why the $25,000 and up VW's just don't sell.

Besides once you get to $30,000 or higher American's buy Audi's.

The V6 GTI's are a blast to drive but it seems only a few Passats and Beetles are all you see.

Edited by hyperv6
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VW wastes its time pursuing the premium and elite markets where it a) has no business and b) already has a brand that does it (Audi). The article is dead right; VWs are not aspirational and they never will be. No one hopes to one day own a VW. No one looks at a VW as a sign that you've 'made it.' Not in this country. A Volkswagen says you're a little out there, a little crazy, a little hip, and a little cool. You want it because it fits your personality and *gasp!* you're supposed to be able to afford it with no problem. That's how VW rebounded from the depths of exile-dom late last decade with the Beetle, Jetta, and Passat. Cute, cheap, affable cars.

Whoever ran the show, however, for the past eight years is a joke on wheels. The Phaeton. The Turwrarughagh. The Eos. All wastes of time and money exerted trying to pursue a market not meant for them. Keep those cars in Europe where they belong. Where is the funk? The cool? The groovy, daddy-o? The Beetle - which is snoring the hell out of me at this point - and the Rabbit/Golf are the only realistically marketable VWs in the lineup.

The new Jetta is bland, soft, and pricey.

The Passat is bland, soft, and pricey.

The Touruhgiuhoiugh is wonderfully-engineered for a market that will never, ever use it. Can you see these 30 year-old wannabe broads offroading their VW? "Hill Descent Control...is that Starbucks' newest blend?"

The Eos doesn't belong here. Get it out of here and bring back the Cabrio. God, I never thought I'd say that, but its true. You're asking folks to spend how much on a Volkswagen convertible with three seperate electrically-moving roof panels? Are you a masochist? You know how horribly disjointed that thing is going to look in three years? What happened to the $20,000 ditzy lil' ragtop that wasn't trying to be a luxury car, just fun?

And now what's on the horizon - a Scirroco? Of course not, there's no market they say. However, there is a market for a lightly-reengineered Caravan. WHAT?! This is the plan? The Microbus would've had standing orders above MSRP for at least two years. VW would've struggled to meet demand, straining factories, importers, and dealers. Instead, VW gets a characterless, bland family box. Someone people are asking, "Is it going to have a diesel? It would be cool if it had a diesel...and maybe a stick. Yeah, it should have a turbo-four and a stick." WHO CARES[/b]...you can buy a Caravan for $21,000 at a Dodge dealership. What moron would buy this VW van?

Remember when VWs had soul? People really didn't give a &#036;h&#33; if they fell apart a little (or a LOT) because they loved 'em anyway. You think Beetles and Microbuses were in any way reliable? Safe? Not really. But they were cute and appealing and people ate them up. Now, VW wants to show it has the pedigree and class to compete in the premium arena. Guess what - people expect premium cars to not fall apart.

Its very ironic actually that the flower child becomes the corporate shill as much as VW has become. I do have to laugh a little at it.

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Why the h— aren't they selling the Fox in NA? The Euro situation is a red herring, since most VW's sold in the US are built in Mexico.

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