Tough European Market Won’t Deter VW, CEO Says

DETROIT – Volkswagen CEO Martin Winterkorn reaffirms the auto maker’s long-term goals in the face of a struggling European market, while promising decisions are near-term on whether to add a low-cost brand for emerging markets and build a new midsize SUV for the U.S. market.

Although he declines to provide a precise sales forecast for 2013, he says he does not expect VW to significantly cut back production capacity in Europe, where the industry now suffers from massive overcapacity.

“We’re not pretending the business can move at this pace permanently,” Winterkorn tells media here, citing 2012 record Volkswagen Group sales of 9,074,300 vehicles worldwide in 2012. “I’m saying Volkswagen won’t cut back and will remain in the fast lane.”

VW’s all-time high volume last year included a record 580,290-unit group sales in the U.S., up 30.6% from 2011, plus new global marks for Audi and newly acquired Porsche.

VW famously has set a goal of becoming the No.1 auto maker worldwide by 2018 in “size, profit, customer satisfaction and sustainability,” Winterkorn notes, adding the company won’t lose sight of those targets no matter the market conditions.

In the U.S., VW continues to target sales of 1 million VW- and Audi-brand vehicles alone by 2018, an ambitious objective that will require an expanded product line.

That likely will include a new, larger SUV meant to position the Volkswagen brand against the likes of the Ford Explorer and Jeep Grand Cherokee in one of the U.S.’s fastest-growing and highest-volume markets.

VW takes the wraps off a 7-passenger concept SUV called the CrossBlue at the North American International Auto Show here today. The vehicle is seen as a forerunner to a production model the auto maker is expected to build in North America.

Winterkorn doesn’t provide a precise timetable for green-lighting the model, saying only that VW will test consumer reaction and, if it is as favorable as he expects, launch a production study for the vehicle. Gasoline, diesel and plug-in hybrid powertrains are promised for the SUV.

If approved, the model definitely would be built in the dollar-zone, the CEO tells reporters at an offsite backgrounder on the eve of the NAIAS press opening. That likely means the vehicle would be sourced either at an expanded Chattanooga, TN, plant or in Mexico.

“It will be a leader in technology and an eye-catcher,” Winterkorn promises of the SUV.

Potentially nearer term is a decision whether to add a new low-cost brand for emerging markets, a move that would help protect the value of the VW marque.

“The decision for markets such as China and India will be taken this year,” Winterkorn promises.

Even if VW doesn’t expand with another brand, low-cost models are in development for those countries, he says later, adding other markets, potentially including Mexico, also could get the entry-level vehicles eventually.

Executives note the continuing tough economic conditions in Europe likely will see new-vehicle demand decline there again in 2013, possibly including the until-recently strong German market.

Winterkorn puts overcapacity in the region at 3 million vehicles annually but says VW won’t close any plants. “I don’t know what our competitors may do, but we are not reducing capacity at the moment.”

“2013 will be a challenging year for the industry and for us too,” he says, adding it is too early for a precise forecast.

As for the auto maker’s longer-term goals, the CEO says it’s only “halftime” for Volkswagen Group.

Although several milestones have been reached, management “shouldn’t be too exuberant. There are a number of white patches in the world we have to catch up in, such as the ASEAN (Association for Southeast Asian markets) and Africa.

“And in Europe, there are some weak markets, and we need a broader product base.”

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