By Richard Read
Three years ago, Volkswagen proudly announced that it would become the world's largest automaker -- in terms of output, sales, and profit -- by 2018.
Things haven't gone as planned.
For starters, the global economy has faltered. When VW made its boastful declaration, the worst of the Great Recession seemed to be behind us. But as we all know from horror films, behind us is where the scary things live.
Across Europe, in Spain, Greece, and other countries, governments finally took a good, hard look at their bank statements. And they realized that the folks who'd been paid to keep the checkbooks balanced had really just been doodling in the margins and scribbling lyrics to Ke$ha songs. In Volkswagen's homeland of Germany,the situation seemed far less dire, but since it was one of the few countries to dodge the bullet, other European nations looked to Germany for bailout funds.
The situation is still a mess. Sales in Europe are dragging down profits at nearly every major car company. The cherry on the giant ironic cake appeared when Fiat -- which charged into the U.S. in 2009 to save Chrysler -- was rescued by Chrysler last year in the wake of terrible European sales. Given Volkswagen's strong base of European consumers, it's been especially hard hit by the economic catastrophe on the Continent.
Then, there's the question of quality. Consider the revamped Volkswagen Jetta, which debuted in 2010. To sell it, VW chose to emphasize the fact that the Jetta was cheap. We were horrified -- especially given the fact that VW's reputation has been dinged in recent years due to cheap, shoddy build quality. (FYI, J.D. Power's latest rankings still score the brand below-average on that front.) Sales of the Jetta soared for a bit, but then fell back to earth. Against better-made vehicles from competitors, VW has had a hard time winning over consumers.
Now, these and other factors are taking their toll: according to AutoNews, Volkswagen has ditched its goal of selling more than 486,000 vehicles in the U.S. in 2013, 11 percent above last year's total of 438,133. The unofficial, revised goal now sits at a far more modest 440,000.
Dealers are breathing a sigh of relief. Volkswagen's complicated system of bonuses and incentives is tied to monthly sales targets, which forces many dealers to treat customers differently at the beginnings and ends of the month. (That, in turn, has caused friction between VW and dealerships.) Thanks to the scaled-back sales goals, dealers can be less erratic in their pricing and more even-handed in customer-relations.
But will VW be able to meet even its reduced goal? Along with Kia, Mitsubishi, and Volvo, Volkswagen is one of the few automakers selling fewer cars in the U.S. this year than last, with sales off nearly 1% from 2012. Given the tight competition for U.S. consumers, we're not taking any bets just yet.