Flint: VW’s Sinking Ship?

February 26, 2006

2006 Volkswagen Golf GTI by Conor Twomey (2/26/2006)
Recapturing enough essence.

 

VW Turns To GTI For Juice by Jim Burt (2/26/2006)
Company pins GTI hopes on a curious new icon.

I’ve always had a soft spot for Volkswagen. I was a soldier in the occupation army inGermany as VW rebuilt itself. They brought out the lovely VW Karmann Ghia when I was there — it cost $1850 — and I dreamed of bringing the first back to America. Alas, I ran short of money.

I was on the job when VW started in the U.S. and watched with admiration its amazing growth and brilliant leadership.

And I was one of the cheering crowd when the New Beetle came out. For a moment VW was on the way back.

But they are in the dumps again. VW has been losing $1 billion a year in America. Sales last year were down to 224,000 VW models from 256,000 the previous year. What’s wrong?

What made me think of all this is VW’s new advertising campaign. According to the New York Times there will be a leggy blonde bimbo — Helga — in the skintight dress in the ads and phony German slogans like “Fast as Schnell” and a new slogan, “Make friends with your fast.”

Shades of Fahrvergnugen.

Bimbo attack redux?

 

Whatever you think of this, it won’t help. Now, I have nothing against leggy blondes, although I don’t think they sell cars. It’s that VW’s problems go deeper.

It isn’t the leadership of VW of America in Detroit. Through the years they’ve been sharp and knowledgeable. 

 

The problem has been in Germany where they’ve refused to pay attention to their people over here or give Americans what we want.

Three problems still exist:

1. VW has stayed out of the largest part of the American market: pickups, minivans, and SUVs. They did bring out one SUV, the expensive Touareg, $40,000 or so, instead of creating a $20,000 model which is what we want from Volkswagen as well as where the market has been growing.

2. The quality level of the cars, particularly the New Beetle, was terrible. Owners who loved their car gave up because they couldn’t take the repeat trips to the dealer. Possibly the quality has gone up, but when you’ve got that bad reputation, it sticks. It takes a huge warranty to win customers back — Hyundai’s ten-year warranty did it — and VW isn’t doing that.

3. And last, the inability to sell the Golf in America. The Golf is one of the world’s best-selling cars, but a dog in America. VW could only sell 16,000 last year and only 25,000 the year before despite diesel engines and the speedy GTI models.

Problems need solving


Until these problems are solved, VW will continue to sink.

Start with the failure to come up with trucks. They designed a beautiful minivan but said they couldn’t figure out how to build it at a reasonable price. They should have figured out how to do it. Now they’ve made a deal to buy minivans from Chrysler, which will put on some VW touches. Okay, it’s a start. Ten years late, but a start. The problem is that if we want a Chrysler minivan, why not buy it from Chrysler?

On SUVs, sales of that expensive Touareg are tanking: 18,000 last year, down from 28,000 the year before. There’s supposed to be a low-priced SUV coming, but again, too little and too late. They could have had a small SUV years ago.

Pickups? They actually showed a concept pickup a few years ago. It makes me think of Honda’s Ridgeline. The difference is Honda built it and VW didn’t.

Why did VW ignore the great trends in America? VW’s German management was only interested in moving upscale: Phaeton, Lamborghini, Bugatti, Bentley. You can’t blame the now-retired chief executive, Ferdinand Piech, for wanting to fly high where to money is, but he should have never forgotten where his main market is, and that is just what he did in America.

Tips for the volk


Will things get better? It’s difficult to see any quick changes, bimbo blonde ads or not. The new models mentioned will help but how much is still a guess. What surprises me is how unimaginative VW has been in coming up with models for the American market. They haven’t had a good idea for this market since the New Beetle.

Since they can’t do it, here are some suggestions:

A new small SUV, built in Mexico off the Golf platform, shaped to resemble the old VW “Thing,” which was modeled off the old wartime VW vehicle. It would look like a baby HUMMER.

Four doors for the New Beetle. The two doors are a pain and NB sales are sinking — only 36,000 last year. More doors could help.

As for the Golf, that may just be a lost cause. The car is quite expensive for its size, but even when the currency situation was reversed — when the Euro cheap and German exports here had an advantage — it didn’t sell.

I think the Golf just looks dated to Americans. Worse, it looks like a $12,000 cheapie that sells for $18,000 and the Koreans are mopping up that cheapie market now. I think the best hope for VW is to build models designed for America, as Toyota does.

Maybe I’m wrong. Maybe the lineup and new ads will turn the business round. But I wouldn’t bet on it.

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