***VW works to stem U.S. losses

For a brand that had been setting sales records left and right in the U.S., Volkswagen's 18.8% drop in September sales compared to a year-ago was an unwelcome surprise.

“Through August we were tracking right on through where we were last year: dead even,” says Frank Maguire, Volkswagen of America's vice president in charge of sales. “We thought we'll end the year a little better than where we did last year, and then of course Sept. 11 and the rest of September really put us behind the eight ball because we really severely missed our sales target.”

However, Mr. Maguire says October sales picked up to “decent” levels and VW expects 2001 sales to end up around last year's figures, when it sold 355,479 units in the U.S. He adds VW is seeing an upturn in showroom traffic thanks to migrating buyers spurred by the Big Three's 0% financing.

“It was like a bowling alley,” says Mr. Maguire of VW showrooms, post-Sept. 11. The traffic VW sees today, while not up to July and August levels, is better because many people are serious buyers, he says. “The closing rates have really increased much more than the traffic has.”

To improve customer service, Mr. Maguire says VW took its dealers to Germany a couple months ago to discuss the brand's future and how it can deliver on “the Volkswagen promise.”

“We think our brand stands for some values and we want to make sure our dealer body knows and is clear on what those values are,” says Mr. Maguire of the trip. “If we can deliver on the promise, we'll create loyal customers.”

VW is also urging its American dealers to upgrade their facilities.

VW is continuing its “marketplace” program, began three years ago to evoke the feel of a European marketplace in its showrooms.

It's VW's way of creating the right kind of atmosphere, “not because we want shiny new buildings,” says Mr. Maguire.

On the product side, VW plans to launch its first 8-cyl. model, the Passat W8, the high-performance Beetle Turbo S and a Beetle convertible, which VW hopes will increase demand for the original Beetle, whose sales have fallen about 18% compared to its debut a few years ago.

The VW Microbus may be revived, says Mr. Maguire. Dealers who traveled to Germany got a peek at that and other potential vehicles of the future. Of all of them, they were most excited about the Microbus, he says.

VW also is working on a new luxury vehicle, codenamed D1, even though VW has a luxury division, Audi. Of a possible customer tug-of-war between the two, Mr. Maguire says the two brands appeal to two different types of consumers.

“The brands stand for different things and have different values,” says Mr. Maguire.

Analyst Dave Andrea of the Center for Automotive Research says, “One of the European automakers that I would take a look at in terms of risk might be Volkswagen.

“They were a solid competitive product but they were looking at selling at the top end of each of the segments price-wise.”