VW to throw in the towel, Stateside?
Newswheel staff :: 19 July 2007 :: Filed under Volkswagen
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A billion dollar problem…
Fancy losing $1 billion a year for three years on the trot? Didn’t think so. But that’s what VW’s US arm has reportedly achieved. It’s unsurprising, therefore, that rumours have emerged indicating that Volkswagen might pull out of America altogether…
According to a business report, VW making one last throw of the dice in the US. German Stefan Jacoby has been roped in to make a last ditch attempt to turn the company’s American fortunes around. His task? To break even by 2009.
If he fails, the result could be an end to VW’s presence in the US. According to Newsweek, an executive close to VW told the magazine, “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.”
Rabbit, Rabbit
It was only a year ago that VW kicked off a major new marketing campaign in the US, including the resurrection of the Rabbit brand in the form of the American launch of the Golf V and a number of controversial TV ads.
Unfortunately, the effect of the campaign has been slim to none. VW sales crept up from 224,000 units in 2005 to 235,000 in 2006. That’s down from a peak of 355,648 in 2001 but still some way clear of VW’s low point of around 50,000 cars sold in the early 90s.
Moreover, the current situation is all a bit of a perfect storm for VW in the US. The company’s cars rank in the bottom fifth of the influential JD Power survey for reliability - hardly ideal for a car largely sold as a utilitarian appliance rather than aspirational toy. And the pitiful weakness of the dollar is hurting all car makers exporting to the US.
Poor planning?
What’s more, VW has made some poor product planning decisions of late, most notably its failure to build a modern reinterpretation of the Minibus of 60s and 70s fame despite a well received showing of concept vehicle. Instead, VW plumped for a rebadged Chrysler minivan. Premium models such as the Phaeton limo and Toureg SUV have likewise failed to spark interest in the US.
What’s more, in an effort to kick-start sales, VW is selling Rabbits at rock bottom margins. Prices kick off at a frankly ludicrous $14,990. That’s right folks, less than £7,500 (UK prices currently start at £12,127). At that price, salesmen are allegedly raking in a princely $200 or so per unit. Funnily enough, it’s thought they’re not all that bothered about shifting Rabbits.
Needless to say, current Stateside sentiments, in the form of web chatter, regarding VW’s woes involve arrogance and an generally overbearing attitude on behalf of patriarch Ferdinand Piech (now back in de facto control of VW courtesy of Porsche’s acquisition of a controlling stake in VW). The installation of a German with no experience of the US market (that’ll be Jacoby) is similarly not seen as a winning tactic.
Linkage:
Businessweek
