Volkswagen Looking for Cost Cuts on Next Rabbit

June 9, 2008
Volkswagen's been hammered by the sinking dollar for years--but the German automaker has a plan to spread its currency pain more evenly. Along with building a U.S. factory due to be announced last month, the automaker's trying to slash production costs for its next generation of vehicles, including the Passat and now, the Rabbit.

Back in 2006, Volkswagen executives told me that the plans for a new mid-size sedan to replace the Passat would have to come in substantially cheaper than the current generation, to realign the car's pricing and market position. The same was true for the Jetta, they explained.

Now, the Wall Street Journal reports that VW wants to chop $1,600 from the production costs of the Rabbit compacts to bring its pricing in line with the domestic and Japanese competition. The sixth-generation Rabbit/Golf should emerge this fall, the paper says, and VW is trying to trim its price structure by reusing components from the current car.

The German car company sees the tactic as the best way to boost its sales in the U.S. from today's 200,000 VW-brand sales to 800,000 in a decade. The other part of the plan will be the construction of a U.S. assembly plant with a capacity of 300,000 vehicles annually, which the Journal says Volkswagen will announce next month. The new plant will export VWs back to Europe and will cut its exposure to the euro, which is trading at all-time highs against the U.S. dollar.

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