Volkswagen Plans North America Onslaught

By Viknesh Vijayenthiran

The global economic crisis has taken its toll on virtually every major automaker around the globe but the effects have varied significantly between firms. General Motors' financial predicament has been well documented, with the ailing Detroit-based firm still recovering from. Toyota (TM), too, has been hit hard by the crisis, with the usually unassailable automaker expecting its first loss this year after nearly seven decades of profit.

Volkswagen (VLKAY.PK), on the other hand, posted a record net profit of $6 billion for the past year, and is still expecting to be profitable in 2009 despite analysts predicting the year to be one of the worst on record for the auto industry. But for the German auto giant to truly topple its rivals, it will have to conquer the lucrative North American market.

To do so, Volkswagen has an ambitious plan centered on a $4 billion investment plan to build an assembly plant in Chattanooga, Tennessee. The new plant will be used to manufacture at least two new models but, according to the automaker's U.S. chief, Stefan Jacoby, this is only the start of a full-on North American market onslaught.

In addition to a new mid-size sedan that Volkswagen has said it would produce locally from 2011 onwards (see photo), the automaker is mulling models for other segments, Jacoby said. Desperate to move out the realms of niche segments, Jacoby also confirmed that Volkswagen will also source a new compact sedan from Mexico.

Under discussion is a new entry-level model based around the 2011 Polo as well as a seven-seat SUV and an updated version of the iconic Beetle. The new SUV would compete with the likes of the Honda (HMC) Pilot, Toyota Highlander and Chevrolet Traverse and would be significantly cheaper than the current Touareg.

Above the new midsize sedan, which is being designed to compete against the likes of the Toyota Camry and Honda Accord and will be available with both diesel and hybrid variants, Jacoby said Volkswagen has another product that could compete with the Toyota Avalon. Finally, to top out the range, Volkswagen plans to bring back an updated version of its Phaeton luxury sedan.

And instead of importing most of its models from Europe, where currency fluctuations have left the company losing billions in North America, its high-volume vehicles will be built in the U.S. or Mexico, with parts from nearby suppliers.

"We want to be the No. 1 automaker globally," Jacoby said during a recent briefing at Volkswagen's U.S. headquarters in Virginia. "Not everybody believes in this goal. We believe in this vision we have, and we are working very hard on its realization."

[Detroit Free Press]

Comments

[cynnatalie2000:]

As long as VW is able to avoid the UAW, it will succeed on a massive scale.

Who would not want a VW brand as opposed to a Toyota if the products are similar.

Aug 28 04:13 PM

[303820:]

YOU'RE RIGHT... THE ONE THING WE DO NOT NEED IS LIVABLE WAGES, HEALTH CARE BENEFITS, SAFETY WORK RULES.
WHAT WE NEED IS MORE FOREIGN TRANSPLANTS UNDERCUTTING THE AMERICAN UNION WORKERS, BRING DOWN OUR WAGES, CUT OUT BENEFITS. THAT IS GOING TO JUMP START OUR ECONOMY, INCREASE PEOPLE'S BUYING POWER, GIVE US A STRONG TAX BASE AND OF COURSE PUT US AT PAR WITH THE REST OF THE THIRD WORLD COUNTRIES...SUCCESS ON A MASSIVE SCALE...

AND WE WONDER HOW WE GOT IN THIS MESS!!!!!!!!!!!!


On Aug 28 04:13 PM cynnatalie2000 wrote:

> As long as VW is able to avoid the UAW, it will succeed on a massive
> scale.
>
> Who would not want a VW brand as opposed to a Toyota if the products
> are similar.

Aug 28 08:51 PM

[a. palmer jr.:]

Maybe if VW is successful with it's Mexican plant possibly some of our "guest workers" might consider going to work there. Probably not, on second thought, Mexico doesn't have free health care and schools.

Aug 29 09:10 AM

[iggyDalrymple:]

> Who would not want a VW brand as opposed to a Toyota if the products
> are similar.

Me for one. VW cannot hold a candle to Toyota in quality, durability, and reliability. Ditto for Porsche.

Aug 29 09:14 AM

[john s. gordon:]

well VW's activity @ new stanton PA some yrs back did not generate much in the way of profit for the parent firm.
maybe the next bet will turn out better.
> jack

Aug 29 10:20 AM

[Motoretrend...:]

Natalie2000 seems to be a fanatical anti UNION Anti UAW cry baby and has a consistent theme in her nasty comments. Is she someone from WalMArt or from Citi or Bank of Amer (all anti union firms)??
Got to wonder why she continues to blast American workers at American factories...

Aug 29 01:24 PM

[Road Runner:]

I think VW can become very successful in North America. They seem to be very innovative like with its ultra high efficiency turbo diesel.

Since VW is accustomed to the very high fuel prices of Europe, I see VW's success in North America somewhat linked to the price of oil. As oil goes up, so does their chances of success.

Aug 29 02:12 PM

[tripleblack:]

VW has selected a good spot to locate its new facility - its a medium sized city just across the border from Metro Atlanta, and one with a long history of heavy/medium industry with a good labor supply nearby.

VW's marketing (an area I have some knowledge of) has been a standout among the carmarkers in the U.S. markets. Effective. If they can capitalize on this image-building, they will find success here. I liken their ad campaigns to the efforts of Subaru, another company which has been successful in a similar vein....

If VW brings new models to compete in the tired, mid-sized 4 door sedan markets dominated by Camry and Accord, I suspect they can carve out a lucrative chunk of a market where folks are ready for something "more".

As for the rush by our state governments to fall all over themselves pushing hundreds of millions of dollars worth of freebies to any foreign company looking to locate a plant in the U.S...

While the same state governments turn a blind eye to existing American companies struggling to survive within their borders...

Well, that's what happens when government gets too deeply involved in private enterprise.

Aug 31 05:55 PM