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Volkswagen US Chief Outlines Plans

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Volkswagen US Chief Outlines Plans
Sees Opportunities in Diesel

March 7, 2008
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WASHINGTON: Volkswagen's chief of North American operations on Friday outlined plans to more than triple sales of the German automaker's brands in the United States over the next decade through aggressive marketing and by taking advantage of growing demand for clean diesel fuel.

Stefan Jacoby, chief executive of Volkswagen Group of America, said his goal is to sell 1 million vehicles annually by 2018 — 800,000 from the Volkswagen brand and 200,000 from the Audi brand. That would be a sharp increase from 2007, when the company sold 235,000 Volkswagens and 94,000 Audis. It also would reverse a downward trend. In 2002, the company sold 338,000 Volkswagen brand cars in the U.S.

Volkswagen is the fourth-largest automaker in the world, but in the U.S. it controls only 2 percent of the market. The company has made the U.S. market a top priority and is overhauling operations here. Its North American headquarters are moving next month from suburban Detroit to northern Virginia — a move the company says brings it closer to its East Coast customer base.

The company also is considering establishing its first production plant in the U.S. In informal remarks to reporters, Jacoby said an exact location has not been chosen but that "we will have that facility here in the U.S."

He later backed off those remarks, saying he was not prepared to definitively announce that Volkswagen will build a plant in the United States.

In his speech at the National Press Club, Jacoby said he believes Volkswagen is well positioned to take advantage of an anticipated increase in demand for cars with diesel engines. He cited a J.D. Power study predicting the diesel car market will increase from 3 percent to 7 percent of the U.S. passenger vehicle market by 2012 as consumers look for better fuel economy and reduced emissions and automakers look to comply with laws mandating more fuel-efficient fleets.

"Diesel is back," said Jacoby, who noted Volkswagen's traditional strength in the diesel car market. "We see clean diesel at a tipping point."

Jacoby likened Volkswagen's struggles in the U.S. to "a puzzle of a thousand pieces," with some products unsuited to consumer tastes and misdirected marketing efforts.

The Audi brand, he said, needs to be driven toward the premium market, the niche occupied by BMW and similar brands.

As for the VW brand, he said "it's been directed too much toward a niche brand, not the major brand for the wide American consumer base."

Jacoby said in the few months he's served as head of American operations he has learned that the VW brand has a place in American pop culture and an opportunity exists to capitalize on that. More than 1,000 people attended a job fair Thursday looking for one of 280 openings expected when the headquarters moves to Herndon, Virginia.

He also joked that he is still adjusting to American automotive habits, which like other countries have their own unique quirks.

"It's driving behavior. It's speed limits. ... it's the sizes of cars. I'm always surprised to see in my rearview mirror a beautiful woman doing her makeup. I'm very afraid and pull over to the right," Jacoby said.

He said he did not expect recently announced plans by Porsche to increase its stake in the company from 31 percent to a majority share to affect plans in the U.S., since Porsche already was represented on the board that approved the new American strategy.

Though Porsche would control a majority of Volkswagen AG, it has said repeatedly that it has no plans to merge the companies.
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