VW to try its hand at 'world' car

Volkswagen AG is setting its sights on a new world car it plans to produce in Brazil as part of a $3 billion investment program set for the next four years. The new global car will be built sometime in the second half of 2000 for Latin America and for export elsewhere, says Herbert Demel, president of Volkswagen of South America. Mr. Demel says the car will be positioned somewhere between the Gol and Polo Classic. The VW Gol is Brazil's best-selling car. The Polo Classic is built in Argentina for the Mercosur market. "When we find national suppliers who are competitive in terms of price and quality, we will nationalize more of our parts for our world car," Mr. Demel says. He adds that the wave of new automakers coming to Brazil is forcing VW to refocus its local operations with an eye to exports. If automakers continue with the estimated $20 billion in investments already announced for Brazil there will be 20% overcapacity in the region, Mr. Demel predicts.

And now, the continuing story of Russelsheim Place

The soap opera that is General Motors Europe continues, with factions choosing sides in the rift between International Operations President Louis R. Hughes and Adam Opel AG Chief Executive David Herman. In the latest installment, all nine works council officials that sit on Opel's supervisory board are said to be backing Mr. Herman, whom Mr. Hughes wants to exile to GM's Russia operations. Mr. Hughes is under fire from unions and some Opel executives who feel GM is neglecting Europe in favor of global expansion, and because it is stretching Opel engineering resources thin as it continues a movement into China, India, Thailand and elsewhere.

Astra delays prompt finger-pointing

Mr. Hughes also is being blamed for quality problems that held up launch of the Astra six months and reportedly may be plaguing other new car programs, as well. Mr. Hughes also is considered persona non grata in Germany because of his call for reductions in the workforce, while Mr. Herman has won union favor by advocating a velvet-glove approach to staffing cuts. Opel and its unions did agree in January to a Herman-type pact that will prevent massive layoffs in exchange for flexible working hours, a reduction of wage increases and workforce reduction through attrition. The contract involves older workers switching to part-time status at 85% of normal wages or retiring early with 80% of their last net income until retirement age is reached. Workers will give up 1.25% of their yearly raises. Additionally, Opel says it will invest DM 750 million ($420 million) in its Russelsheim plant and will hire additional workers at Bochum, Germany. The company is also considering a new engine plant in Kaiserslautern, Germany.

Ford gets subsidy; VW gets slapped

The U.K. government says it will kick in 43 million British Pounds ($70.1 million) to help Ford Motor Co. launch production of the new Jaguar X400 at its Halewood plant. Building the vehicle at Halewood will protect 2,900 jobs at the factory. The X400, which is expected to go on sale in 2001, will be designed and developed in Coventry, and is expected to compete with the likes of the BMW 3 series. Politics isn't as kind to Volkswagen AG, which finds itself on the short end of a record $122 million in fines levied by the European Commission. The EC says VW restricted its Italian dealers from selling cars to customers from Austria and Germany. VW has three months to pay the fine and two months to stop the dealers from refusing sales to border-crossing shoppers. The automaker plans to appeal the decision.

Chrysler, Volvo zero in on South Africa

Automakers are focusing more attention on South Africa, with Chrysler Corp. looking to double sales there this year and AB Volvo planning assembly in nearby Botswana. Chrysler, which launched a right-hand-drive version of its new '98 Cherokee in South Africa in February, is targeting total vehicle sales at 2,000 units through eight dealers in 1998. The Cherokee, which will be offered with either a 2.5L diesel of 4L gasoline 6-cyl., tops out at $50,000 and joins the Neon, Wrangler, Voyager and Grand Cherokee in Chrysler's South African lineup. Volvo says in 1999 it will assemble its S40/V40 in Gaborone, Botswana, on the South African border. A free-trade deal between the two countries will allow Volvo to avoid import tariffs. Complete-knocked-down units will be produced at a $52 million plant built by Hyundai Motor Co. Ltd. and operated by Wheels of Africa. Hyundai also will assemble its cars at the plant starting later this year. Volvo is looking to sell 1,800 S40s and V40s this year in South Africa.