VW's Plan to Reconquer America

Posted by: Gail Edmondson on November 28, 2007

VW advertising.jpgVW beetle.jpgPassat 2008.jpg


Let’s say you’ve never owned a Volkswagen before. Would you at least take a trip to a VW showroom and compare models with Toyota or Honda, if VW’s were priced the same?

That’s what’s VW’s new management in Wolfsburg is betting. As Volkswagen’s cars have quietly crept upmarket over the years, the brand lost its 1970s image in the US as “the people’s car” and lost its following. Toyota zoomed into the vacuum and became America’s value-for-money auto brand, riding that image to the top of the US market.

In Europe, by contrast, the VW brand has long reigned No. 1. For the first 10 months of 2007, Volkswagen garnered 10.4% of the European market to Toyota’s 5.5%. One reason is that Europeans have moved upmarket in their auto tastes, and are willing to pay for the newest safety and handling technology.

Americans, by contrast, are not willing to pay a premium for all the German engineering under the VW hood, no matter how many great automotive innovations its engineers pack into new models. If they go German, they go all the way to BMW, Mercedes and Porsche. The result is, Volkswagen is stuck on the sidelines in the US market with a brand image that doesn’t appeal to the average Joe, nor to the investment banker spending his first bonus. Look at the numbers: VW sold only 330,000 cars in the US, compared with Toyota’s 2.5 million. (In Europe, the VW Group sold 2.1 million cars last year.)

To challenge Toyota — VW’s new rallying cry — the Germans aim to tailor their US models more to US tastes. That means cars stripped of some of the fancy technology that comes standard in Europe. By making more basic versions of its cars for Americans, Volkswagen will be able to slash the starting price in the US to the same level as Toyota’s comparable models. Finally, VW vows to match Toyota’s quality and service in the US — perhaps the bigggest leap of all. (Yes, Toyota-like quality is a basic precondition for VW to win US hearts and minds.)

New VW models designed from the get-go for American tastes will take a few years to bring to market. But it will be interesting to see just how fast VW starts to pick up steam in the US — and fix things like quality and service. If anyone see signs of Volkswagen doing a good mimic of Toyota in America, send tidings to this blog.

Reader Comments

Noz

November 28, 2007 8:11 PM

The Beetle. I well recall seeing one of the very first of these bugs on Highway 99 here in CA in the mid 50's. It had a tiny two-pane 'backlight' and taillights one had to use binocs to see. It passed my '36 Chrysler (Standard model) while rather badly breaking the speed limit.

Then in 1966 I was finally able to drive one of them, a two-year-old model. My knuckles hit the windshield, the heater worked just fine in the summer, the sweaty seats were torture, and, of course, acceleration was just a dream--as was braking, defrosting, guessing the amount of gas remaining, etc. Only Germans could put up with this kind of thing. And Mexicans, of course, who just recently finally killed their production.

The New Beetle has really crappy-sounding doors, amid-ships seating, poor reliability, and a personality only a sicko could love. It's time that it died. To be replaced with what? How about something really well-engineered and assembled for a change. And yes, the old Type II or what-ever it was is a thought. But it has to be a lot better than that terrible-handling death-trap, not a difficult task with designs that are now on file. Are the Germans up to it? I doubt they are based on past/recent performance.

ivan the terrible

November 29, 2007 1:11 PM

the early bug was conveyer without a heater.
Quality and service, yes. The wiper replacement is a dealer only item.

ouch! Ach! good luck!

Bill

November 29, 2007 6:31 PM

Gail, you are all wrong. VW will never conquer a country outside of Europe and some third world countries it now has a stranglehold on.
And it's not because Europeans are willing to "pay a premium for German engineering". It's because Europeans are very provincial and, especially the Germans, think they make the best cars which is untrue. In addition, VWs sell well in Europe mainly because they are a cheap car and most Europeans (again, especially Germans) are "cheapskates".
VWs have shown for many years they do not live up to the QUALITY expectations of Americans. The Japanese cars started beating VW in quality and reliability years ago and now offer more "fahrvergnugen" than the Germans do and for less money as well.
So why buy an unreliable VW when you can have the same "engineering", performance, handling, etc. as VW along with better quality and reliability? That's why VW is going down the tubes again in the US.
The myth of "German engineering" is just that. Many Japanese companies make engines, chassis and drivetrains that are as well-engineered as any of the Germans --- and they last longer to boot. It's about time many ill-informed Americans realize that German engineering is only a myth and stop paying a premium for it (the myth).
So, don't hold your breath until VW "conquers" the US. You will be dead by then.

gary lopez

November 29, 2007 8:34 PM

As a VW service technician I see what's new from VW. And the new models starting from late '05 are exactly that. The engineering is amazing and the internals of the car are much better put in place. They work in a much friendlier matter. The new models are definately built better and the price offered for these fun-to-drive unique vehicles makes them a great brand to own or lease!

gulfbridge

November 30, 2007 9:26 AM

I find it interesting how so many Americans who tell you about their ‘quality expectations’ seem to feel they have to go to Japanese manufacturers to have these satisfied. This despite American cars scoring very well of late on quality surveys by JD Power and others, while some Japanese manufacturers like Toyota have been seeing declines in their quality ratings

Rand

November 30, 2007 9:43 AM

I have to agree with Bill. The most overrated cars on earth are the Mercedes and BMW. Reminds
me of Bulova watches back in the 50s. It's all
advertising hype to create a phony reputation
among people so gullible they buy a car simply coz lots of doctors drive them. Honda has all the German cars (and Toyota) beat in terms of
engineering and quality.

G. Edmondson

November 30, 2007 9:45 AM

Bill,

If you read my blog carefully, you will see that I am not asserting VW's ability to conquer America. I'm laying out management's strategy. I even opened the blog with a question about whether Americans will buy a cheaper VW -- which you clearly answered. I didn't presume to answer the question.

Can VW win back the US car buyer? There are two points to add to the debate. One is that VW quality in the US appears to be worse than the quality of cars made in European plants -- though there is room to improve in Europe too. In Britain, VW's Skoda unit is No. 1 in the J.D. Power quality rankings. Auto industry experts say VW's Mexican plant, which supplies a lot of VW's US cars, has far lower quality than its European plants. That's a problem that needs to be addressed urgently.

Second, VW is not cheap in Europe, by any means. GM-Opel, Ford, Renault, Peugeot, Fiat, Toyota, Hyundai, Kia and Honda all sell models comparable to VW's with lower sticker prices. The highly successful Opel Astra compact, which launched in 2005 and sold for about 1,000 euros ($1,500) less than the VW Golf in Europe, forcing VW to rethink its technology content and pricing strategy.

Don't forget that VW is market leader in China. So the company is not without its strengths. It simply hasn't figured out the US market yet. Good managers can make a world of difference at any company. Take a look at Fiat, which is back from the brink of bankruptcy -- and wowing with its cheeky products, clever marketing and great design. It's all thanks to CEO Sergio Marchionne.

One last thing about German cars -- there is a qualitative difference in their handling compared with Japanese cars. German automakers obsess about handling and safety -- and go to great lengths to trump the competition with new innovations. The handling of a Golf RS or an Audi A5 coupe might well be hard to appreciate on US roads given the speed limits. But Europeans are fanatical about good handling and they appreciate the cars built by German automakers, VW included. Bland handling and bland styling is one reason European car buyers find Toyota's cars frankly less appealing. Lexus has actually lost market share in Western Europe to date this year -- and has only 0.2% of the European market.

To conclude: VW hasn't figured out the American market yet. But it's far too early to count Volkswagen out in its drive to shake up the global rankings.

Alex in Toronto

November 30, 2007 1:50 PM

Wanting your sales to grow is one thing, and making it happen is another. One need only look at every sales prediction from every car company doing business in North America (including Toyota) in the last five years to see that it almost never happens. It's especially difficult to earn huge growth in a mature market with an endless onslaught of great new products in every segment. Much of Toyota's growth resulted from the fact that it's entered so many new segments in the last 20 years (since the debut of Lexus, essentially). The China-India-Russia markets will offer the growth and that's where the battle for global auto dominance will be fought, between GM and Toyota, with VW and the rest looking on.

FahrvernugenOuch!

November 30, 2007 2:05 PM

VW bugs: no heater, no AC, no power window/lock/mirror, no electric pump windshield spray; no carpeting; no sound insulation; no power air cool engine; can't meet smog standards.

Toyota corolla: heater, ac, power window; AM-FM cassett; electric pump windshield spray; carpet; sound insulation; water-cool engine with power; meets smog standards.

Unglaublich; es tut mir leid, aber es geht nicht!

Rob in Madrid

November 30, 2007 3:42 PM

It's ironic, Toyota reigns supreme in resale value in Canada but seriously lags VW and other German brands in Germany. For someone like myself who really only cares about value for the money I couldn't beat a used Toyota and then a Mazda. Almost a third cheaper than the equivalent German brand. And as others have pointed out the Japanese vehicles reign supreme on the quality ratings even in Germany.

Franck in Kansas City

November 30, 2007 5:43 PM

Bill and Rand are hanging on to false beliefs. Volkswagens hold their resale value better than any other brand in America according to kbb.com. VW just dethroned Honda and Acura. That's collective America speaking out! This is huge! It must be that VW really does make a better car.

I lived in France for 17 years and Gail is right. VW is a prestigious brand in Europe. When commutes average speeds in excess of 120mph people there just don't think Toyota.

I am against VW 'dumming' their cars down for America. It reminds me of the saying that we should write everything at the 8th grade level so people can understand what we're saying. Grow up America, let's learn and gain knowledge about why VW is better and let's demand the same quality, technology and safety standards from other manufacturers!

VW should bring the smaller Polo in the US to compete on price. More diesel options would not hurt. Keep focusing on safety features. In a country where the make-up man is more important than the speech writer, it's difficult to gain ground but it can be done with knowledge. This is war of ideas they're engaged in and they must win it with countering falsehoods with knowledge and truth. Let's see more of that in the commercials.

Franck in Kansas City

November 30, 2007 6:33 PM

FahrvernugenOuch!: Don't apologize. You're showing your age. What's unbelievable is that you believe this!

VW Beetle S base model standard features: Traction and stability control (ESP), four-wheel disc brakes, 5 Cyl 2.5 Liter, 6-speed automatic tiptronic, 4 yr. / 50000 mi., 12 yr. / Unlimited mi. corrosion, 170 ft-lbs. @ 3750 rpm, 205/55R16 H, remote power door locks, Heated Mirrors, cruise control, tilt and telescopic steering column, dual illuminated vanity mirrors, Side Air Bags, Satellite Radio, CD MP3 Playback, 6 Speakers and the list goes on...

Toyota Corolla Ce base model: 4 Cyl 1.8 Liter, 4 Speed Automatic, 3 yr. / 36000 mi., 5 yr. / Unlimited mi. corrosion, 122 ft-lbs. @ 4200 rpm (anemic), P185/65R15 S, 2-wheel disc with drums in the back, 4 speakers. Traction and stability control not even available.

And that's not addressing the Corolla's bland on-road personality, awkward driving position, optional major safety features, and not even mentioning the lack of upscale convenience features like no sunroof, no heated seat, no variable intermittent wipers, and the list goes on.

Do yourself a favor and look up Edmund's comparison if you're willing to gain knowledge and trade your false ideas for some new true ones.

Rand

November 30, 2007 10:21 PM

Franck in Kansas City: What false beliefs? I was talking about where the quality is (which ain't in Europe). You talk about "collective America speaking out" merely another way of saying most car buyers know very little about cars. If we look at relative market share in different markets around the world, one thing becomes quite clear--market share reflects buyer taste, not product quality. I challenge all you German engineering advocates--loan your Bimmer to a cousin and drive a new Honda Accord for a month. You will get an education about engineering and quality as I did. I sold my 3-series Bimmer and bought a Honda--what an eye-opener. The Honda is smoother, quieter, quicker, more power, more precise handling, more fun to drive, and MUCH better fuel economy. The only "superior" feature I could find on the BMW was its famous round badge.

Dave

November 30, 2007 11:21 PM

I have owned four VWs among many cars in my 35 years driving, and they are unlike any American or Japanese car. The handling is far superior to those cars, especially as speeds rise. My current car, a '07 Jetta, has been the best yet. The little luxuries are unique at the price, such as very upscale interior lighting and quality finishes. I average 26-27 MPG, too. Dealer service is spotty, but I have always found a good dealer (Honda and Toyota dealers are not exactly known for responsiveness - they act as if you'll buy again no matter how they treat you.) I see VW trying harder to delight in the service process, and the product is as good as ever, so I think they can accomplish their goals IF they keep the improvements going. My fear is that they will fall back into old habits and let reliability slip.

I agree, Franck - bring in the Polo, and perhaps even the very interesting Fox I saw in Rio recently.

Gireesh

December 1, 2007 1:16 AM

I bought a new VW Jetta (MKIV) 1.8T in 2001.
Have regretted it ever since. How can a company aim to compete with Toyota when the window falls into the door, engine coilpacks need replacing every so often, faulty coolant bottles, electrical system gremlins and God knows what else.
If VW needs to compete in the USA their quality needs to improve by leaps and bounds.

MO

December 1, 2007 7:50 PM

I bought a Volkswagen Jetta TDI in January 2002. I have approximately 152,000 miles on my diesel, and despite the occasional issues (two small coolant leaks), this diesel has performed amazingly well. I know I am one of the lucky ones because I have heard the horror stories about VW owners with constant repair issues. There is nothing like driving a German car. I own a Volkswagen, and I have driven various Mercedes-Benz and BMW models. Toyota cars are maybe more reliable, but they are bland and lack performance. The new VW models that are coming out within the next couple of years have great designs, and the powertrains are top notch. Reliability is VW's achilles heel. I never really liked that my car was manufactured in Mexico because the standards in that factory do not match the standards in Germany. Germans are definitely fanatical about their cars and great handling. I have traveled through Germany and experienced it firsthand. I agree that VW should not dumb down their vehicles, but I also think that VWs are overpriced with their current reliability track record. If VW could improve their reliability ratings, then a Jetta would be worth it at $25,000. VW can succeed in the U.S., but they need to focus on reliability, promote better dealer experiences, and provide more reasonable parts and service costs.

Jon

December 1, 2007 7:56 PM

I agree with Bill and Rand. Mercedes and BMW are so over-rated. And Quality is a RELIGION to Toyota. VW will never match it. You can't trump religious fanaticism. Is it "German Engineering" or "German Contraption".

However, the author and the Kansas guy made a good comeback.

But I still put my money with Bill and Rand.

MichaelS

December 2, 2007 12:08 AM

VWoA needs to introduce no-haggling policy and clearer financing terms so its shark-like dealers wont scare buyers away. VWoA has just lost a customer and a longtime GTI owner because of all VW 4 dealerships in my regions treated me the same ***** way.
My current Corolla 2008 sans ABS seems unable to respond properly when riding beyond 75 mph, let alone the 180kmh I used to clock back in Germany with my GTI.

Kevin

December 2, 2007 1:46 AM

Watch out - Porsche is the world's richest carmaker. They just invested in 31% of VW's stock and now are controlling shareholder. They too have said that VW is a "untapped goldmine" and the only carmaker that can take on Toyota worldwide. They have the "know how" which they gained from none other than Toyota itself. VW will be concentrating on four platforms which some say will yield up to a 40% savings over current production costs. That could mean trouble for others to compete if they pull it off. If I were a betting man (and I am), I'd bet the bank that they'll make huge leaps over the next four years just as they predict. Will they topple Toyota? Who knows. If they come close, expect to see plenty of them on your streets.

Tim Flowers

December 2, 2007 12:48 PM

German engineering is no myth, and anyone who has actually owned German cars will attest to that. The Japanese cars I've driven, while nicely assembled, tend to feel light and cheap on the road (compared to German cars) and have inferior ergonomics.

That said, there are huge differences between VW's and BMW's. I've owned several of both brands, and I don't plan on buying another VW. The BMW's are totally solid and reliable, seemingly unbreakable. The Volkswagen's are just BMW wannabe's. VW's are nice for the first month or two of ownership, and after that you'll be on a first name basis at the local un-service center. Usually the problems are minor annoyances that just never seem to get fixed right, such as squeaks and rattles, but on cars selling for upwards of 25K, such problems are unacceptable.

amigaboy

December 3, 2007 1:42 AM

as the current owner of 3 and the experienced owner of many previous (air- and water-cooled) VWs over the past 20 years, I have a few comments/quibbles on this article:

1) VWs succeed in Europe for several reasons, not just because 'germans like them' - they offer a good balance of drivability, engineering and price - it's called value. And remember while Germany may be the biggest single market in Europe, they aren't the only ones buying all those VWs, to be sure. VW also has the advantage of being able to offer (fairly) similar cars under the SEAT and Skoda brands while being upmarket with Audi and doing joint projects with Porsche - being able to share common platforms and parts and still have successful/distinct brands is something GM forgot how to do back in the 60s when they tried to compete with VW first time around (and VW had about 2 platforms at that time - bug and bus)? If you look around in europe, you see mercedes and bmw taxis just like you see Caprice and Town Car taxis here - VWs aren't so much as 'upmarket' in Europe as 'mid market' - say like Toyota and Honda are here - where they are able to retain a price point due to perceived value.

2) I freely admit VW has periods of 'quality challenges' from time to time - witness the late 70s/early 80s, and witness the late 90s/early '00s, for gas cars anyway - having said that, we own an '00 TDI beetle and and '05 TDI Golf - and both are very strong cars and great runners, fun to drive and have some 'personality' - Whether or not you like VWs, you have to agree that much of what Japan puts out, rock-solid reliable (or not), is b-o-ring. Much like a Volvo. For me, I want the car I drive to have at least a little pizazz? Lumping around town in a Camry doesn't cut it, friends.

3) I would argue fairly strongly against the 'lack of brand' image proposed in this article - I would definitively state that VW has still (in spite of some self-made attempts to undermine it from time to time, probably not on purpose) one of the strongest brands out there - The Rabbit comeback seemed to resonate pretty strongly from what i've read (and is a MUCH better car this time around from the 80s version :) - the New Beetle essentially brought VW back from the dead in the late 90s - but most of those buyers ended up in Jettas, not Beetles (because they had families) - there have been many periods like this. Everyone knows what that logo stands for, even if they can't name a specific car - only a few other carmakers can say that (e.g. Ford, Ferrari, perhaps a couple others)?

What I would say VW needs to do is threefold:

1) Keep improving quality. They have already made significant strides in doing this - KEEP IT UP! If execs in Germany or USA (or wherever) disagree, fire them! There is no excuse in this day and age for building cars that can't run well, and this applies to anyone and everyone that sends them to the USA, especially. You think Kia and Hyundai get cut any slack because their parents have fond memories of driving a bug in the 60's? No way. Nor should VW.

2) Capitalize on strong regional markets - I live in Seattle, and unlike some other parts of the country, we have LOTS of VWs, new and old, around here. My neighborhood alone probably has at least 25-50 of them of various years and models, and probably more than half of those are models since '00. We have 2 VW dealerships in Seattle itself, two immediately outside in the suburbs, and at least 2 more within about 20 miles of the city - VW needs to study those dealerships and see what's going right - and I suspect it will be the usual things - attention to detail, customer service, and value - there's nothing new there but to pay attention.

3) Finally, exploit your brand - unlike those other brands, you have a uniqueness in the market that is really unmatched - take advantage of it! Various attempts have been made to do this over the past several years, some weirder than others, but pay attention to what appears to be working, ask the dealers, and build up on that. You don't have to deal with 4 major car lines here in the USA like in Europe - and your product line is far simpler (side note - where are the diesels, hel-lo?) - this isn't rocket science.

Good luck - we're rootin' for ya!

amigaboy
Seattle

Rich

December 3, 2007 3:20 PM

I have owened a couple of VW's over the years. It has always been a love hate relationship of sorts. I have always loved the handling, engineering and road feel. I have always hated the below average mileage, expensive upkeep, and spotty quality. We shall see.

RDW

Franck in Kansas City

December 6, 2007 11:49 AM

What's up doc? About Rand's challenge, we owned a 86 Honda Accord in the mid-90s and it was a rust bucket with several issues, not anymore reliable than anything else I've owned, but I don't believe all Hondas are that way. You call people "gullible" and you say "they buy a car simply coz lots of doctors drive them." I don't think "doctors driving them" is a kbb selection criteria, yet they rate VW number one with projected highest resale value over any brand in the US. Rand says "Honda has all the German cars (and Toyota) beat in terms of engineering and quality;" kbb.com who studies the data all day long says VW has them all beat. You decide.

Stephen

December 12, 2007 9:40 AM

After selling Honda Cars for years, the superior features of VW have won my business. VW just knocked off Honda for having the highest residual value. I buy them for this reason and the FACT that their 3300 lbs. Diesel get 58mpg at 70mph in all weather. Having ditched Honda, I find the superior handling of the Jetta/Golf/Rabbit to suit my aggressive driving style. My wife is the only person where she works that drives (22 miles on country roads) to work in the Snow when all the others claim to be stuck with their Japanese and American SUVs.

It's cheaper by a wide margin to own a VW over ANY other vehicle particularly when that VW is a Diesel. When the 2009 Jetta/Rabbit/Passat appear they will instantly make up over 40% (initially probably 80%) of VW buyers. Even the larger Passat achieve all weather fuel miles superior to ANY hybrid.

Vw is 4th largest in the world. They will likely be No. 1 in future. They will do this because they have superior products that are desperately needed in a world that is running out of gasoline and will have to switch rapidly to Diesel and biofuels soon. VW also has the ONLY automobile with a Fuel Cell that is actually slated for production. The UP! fuel cell car will be produced first in China (which has the world's fastest trains at 310mph also).

VW is beginning to reap the benefits of their superior world leading technology. Only past marketing mistakes (and governmental bias) put the Japanese into the position they are in now which is largely based on dealer forged owner surveys.

My gasoline Golf Averages 29mpg (Epa 25/31). My Diesel Jetta average 45 (Epa 36/46). The Jetta tops 55mpg on the highway in any weather at 70mpg. No Hybrid can approach this in our weather.

danny

December 16, 2007 4:58 PM

honda and toyota are only huge in america in japan gm is reigns supreme, i own a gti and it's an amazing car no toyota in its current line up can beat it.

vw is not trying to be bmw if anything its trying to be an audi which will conquer the luxury segment, audi already have the best prices, engines, interiors, all it needs is reliability.


honda doesnt even have a v-8 engine in its line up!!!!

Chris

December 22, 2007 8:41 PM

Although I regret purchasing my '02 Jetta Wagon 1.8T, I have a hunch that the weak link is the dealer/servicer in the States. The 1.8T wagons were built in Germany, and I am convinced the quality didn't tick any higher than the Jettas from south of the border. I even had to catch the tech in a lie with the service analyst for my local dealer to agree to replace a faulty transmission (25000 miles). This was after 5 visits and they still blamed the regional manager. Across the street is where I bring my '04 Honda Pilot. I pay about $25 more on average per service visit, but guess what? Impeccible service, pristine auto bays, and at least the perception that they are doing what they say they are doing. And I am willing to pay for it. My gut is that once you shell out $25,000 for a purchase, you get to assume that the brand stands behind its product. The problem with VW is that they would rather sell an image or emotional impulse ala the iPod rather than a car you want to keep. I am tired of cool. I want substance. European or not, we should still stand behind the contract that is a sound dollar deserves a sound product or service.

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