How VW expects to end its US sales slump
Hannover, West Germany
Much to his dismay, ''the beetle is growing in all directions,'' reports Dr. Carl H. Hahn, chairman of the board of management of Volkswagenwerk AG. While the beetle hasn't been built in West Germany for many years, it is still built in Mexico, Nigeria, and Brazil and, says Dr. Hahn, ''about 20,000 will be sent to Europe in 1983.''
The point is: The beetle just won't go away, and VW is reluctant to pull the switch on the feisty little car that still enjoys popularity in some parts of the world. Last year about 200,000 beetles were produced.
The car is even being brought into the United States by an enterprising group in southern California, adapted to meet the US safety and emissions laws, and then sold for a base price of about $7,000.
''It's nothing but nostalgia,'' says Dr. Hahn with a sigh. ''We have better things to do than reintroduce the beetle.''
Meanwhile, VW officials, both in the US and West Germany, are working hard to cut costs, boost Rabbit sales, and pry the company out of its deep US rut. VW has been especially hard hit by a drastic slide in diesel-car sales, down by half or more in the last year.
The West German vehiclemaker lost a whopping $126.6 million in 1982, which it blamed on its subsidiaries, especially in the US and Brazil. This, however, is small compared to the US auto industry's red-ink bath of some $12 billion over the last few years.
Volkswagen of America lost $146 million on sales of $2.5 billion. In 1981, by contrast, Volkswagen of America made a profit of $600,000 on sales of $3.3 billion.
VW sales worldwide last year were off 7 percent from the previous year - 2.12 million units in '82, compared with 2.28 million in '81.
On the hopeful side, VW imports - in other words, non-Rabbits, except for the convertible - were up a whopping 32.8 percent in the US in the first three months of 1983.
Indeed, a VW spokesman reminds, there is a lot more to VW than the Rabbit.
The VW chairman says the company now is breaking even in Brazil and ''expects a profit in 1983.'' In the US and Mexico, however, he says he doubts the company will break even, much less make a profit. A VW spokesman in the US, by contrast, was far more hopeful, saying the chairman was probably ''overly pessimistic.''
''Imports account for 60 percent of VW's profit in the US,'' he reports.
The US organization is particularly bullish over the prospects for the upcoming Audi 4000 Quattro, a smaller, and much less costly, version of the Audi Quattro, which went on sale in the US a year ago. Quattro sales so far have been few, due in large measure to the $35,000 window sticker on the car in a time of deep recession.
The so-called ''baby Quattro'' is expected to sell for at least half the price of the big car.
Part of the VW problem in the US, Dr. Hahn surmises, ''is that we lost contact with the American consumer.'' The company's No. 1 priority is to reactivate that contact.
To do so, VW is placing more emphasis on its German heritage and is now marketing an array of cars called the ''Wolfsburg collection,'' involving the Scirocco and Rabbit convertible - both built by Karmann in Osnabruck - as well as the Jetta and a limited-edition Rabbit.
The high-performance Wolfsburg Scirocco, according to VW, is the fastest VW ever sold in the US and has a high-output, 1.8-liter fuel-injection engine. After driving the ''Wolfsburg Scirocco'' on and off the autobahn here in West Germany, I can confirm that it lives up to its billing.
VW also will ship 500 aerodynamically refined, ''limited edition'' Sciroccos to California for sale (shown at the right).
Despite its problems in the marketplace, the VW management, both in the US and West Germany, insist the company will not give up its Rabbit production in the US, despite some urging that it build and ship all its cars from Europe. The US-built Rabbit has come under fire for shortcomings over the years, some of it generated by the West German carmaker's US dealers.
''We do not intend to pull out of the US,'' Dr. Hahn asserts.
Ironically, VW is selling its second US assembly plant in Stirling Heights, Mich., to Chrysler, a plant which VW acquired a few years ago but didn't complete or put into production. When Chrysler Corporation began flirting with oblivion, VW bought the unfinished Chrysler plant in Westmoreland County, Pa., near Pittsburgh, where it now builds the Rabbit.
''The productivity of the Westmoreland plant will be better if it is focused on one vehicle.'' says Dr. Hahn, adding that the company has no immediate plans to build the 4-door notchback Jetta in the US. It has, however, stopped building the Rabbit-derived pickup truck.
In defending the workmanship of the Pittsburgh-area assembly plant, Dr. Hahn says, ''You can introduce your engineering and production philosophy anywhere in the world,'' noting that VWs in Germany are built by Turks and Italians, among others.
The VW chairman says he sees ''no trouble with American auto workers.'' They are, he adds, ''disciplined.''
Looking at the Japanese, he says he ''is sure that Honda will introduce its philosophy in Ohio as will Nissan in Tennessee.'' Everybody, he continues, ''wants quality.'' However, he concludes: ''No one can compete with the Japanese on price at this time.''