By Richard Read
In 2007, Volkswagen (OTCPK:VLKAF) announced its intention to become the world's biggest automaker by 2018, but talking the talk has proven easier than walking the walk. Can a new SUV aimed at Americans help VW stay on-task and on-time?
HURDLES TO OVERCOME
When VW made its bold announcement seven years ago, achieving #1 status seemed doable. After all, Volkswagen's reach was huge, with numerous brands and sub-brands under its belt, including Audi and Porsche. With the right strategy, rolling to the top of the heap in 11 years was completely within the realm of possibility.
And then things changed.
For starters, there was the Great Recession, which really hit the auto industry in 2008. True, the recession affected car companies around the globe, meaning that General Motors (NYSE:GM) and Toyota (NYSE:TM) -- VW's biggest competition -- were also crippled by the meltdown. But Volkswagen is based in Europe, and that's where the company makes a sizable chunk of its sales. And unfortunately, while the rest of the world has begun to recover, Europe is still mired in economic turmoil, putting a dent in VW's bottom line.
Worse, shoppers in the highly lucrative American market haven't been keen on Volkswagen for some time. Granted, some brands in the VW family have seen strong growth (namely Audi), but the company's mass-market brand, Volkswagen, has suffered from image problems. That may partially explain why VW ended 2013 down 6.9 percent, while most other automakers -- even Mitsubishi! -- finished the year in positive territory.
There are many reasons for VW's problems in America, but three stick out:
1. Quality: Once upon a time, Volkswagens were considered very well-made. Early Beetles, for example, were notoriously durable and legendarily easy to repair. Though VWs haven't necessarily dipped in quality, they've been outshone by Asian brands like Toyota and Honda.
2. Diesel: While most other automakers see electric and hybrid vehicles as the way of the future, Volkswagen has continued to put its eggs in the diesel basket. Don't get us wrong: VW's diesel cars are great performers and can earn stellar fuel economy. However, Americans haven't been as eager to embrace diesels as their European relatives. (Too many bad memories of loud, clunky engines from the 70s and 80s, perhaps?) That's dinged VW sales and dulled its image as a forward-looking company.
3. Unappealing SUVs: Americans love big vehicles, especially SUVs and pickups. Unfortunately, Volkswagen offers no consumer trucks and only two SUVs, the Tiguan and the Touareg, neither of which has gone over well with U.S. shoppers. And so, VW has had to subsist on sales of sedans like the Jetta and sporty models like the Golf, limiting its customer base.
Last night, at the Detroit Auto Show, VW executives announced that a seven-passenger, midsize SUV was coming to America. As we've known for some time, it won't be a replacement for the Touareg, but instead a new vehicle based on the CrossBlue concept.
Unfortunately, that's about all we know about the SUV. According to AutoNews, VW declined even to note where it would be built, but it's likely to be either at the VW plant in Chattanooga, Tennessee, or in Mexico.
The new SUV is set to arrive in calendar year 2016. Is that too late for VW to achieve its lofty sales dream? It's hard to say, but CEO Martin Winterkorn last night reaffirmed the company's goal of selling one million Volkswagen and Audi vehicles in the U.S. by 2018. Considering that in 2013, the two sold around 565,000 combined, that's a long row to how -- long, but not entirely impossible.