VWA Sees Upward Sales Trend After 2007

PHILADELPHIA – Volkswagen of America Inc. expects little sales growth in 2007, but if new products are a harbinger of success, the following year portends a trend line with significant potential.

“We just have to have more products in more segments, which we’re working on,” says David Wicks, VWA sales director, during a press preview here of the ’06 Rabbit.

Following this year’s rapid-fire launches of its re-engineered passenger-car mainstays – the Jetta, Passat and Golf-based Rabbit – VWA’s product introduction pace slows.

Along with a freshened Touareg cross/utility vehicle, which also gets a new V-6 engine, VWA will launch a Mexico-built Jetta wagon and bring to North America the coveted Golf-based R32. But that’s it.

“We’ll have some other special-edition models,” Wicks adds.

Under consideration is a “triple-white” Beetle convertible that would feature a white exterior, interior and ragtop, a VWA insider tells Ward’s.

“We certainly will lose some of the sales volume with the reduction in diesel availability,” Wicks admits, referring to VWA’s 1-year regulation-induced hiatus from the U.S. diesel passenger-car market.

The auto maker’s current diesel technology cannot meet pending U.S. emissions standards, but it will return to the market in 2008 with a re-engineered Jetta TDI.

“We will carry over some ’06 (diesel-powered Jettas) into 2007,” Wicks says. “We think we can compensate with these other models. But I don’t see a great deal of growth in 2007 vs. 2006, because it’s a transition year.”

The transition will see VW enter segments where it has either never played or never played well. In addition to a Golf-based small cross/utility vehicle known internally as the Marrakesh, VW will launch – by virtue of a joint venture agreement signed in January – a minivan based on Chrysler Group’s next-generation RT platform.

“The minivan is a vehicle that can add significant volume to the overall mix, because we’re not going to cannibalize (brand sales),” Wicks says. “So that, really, to us, is incremental volume.

Product planners assigned to the minivan rollout recently have moved to VWA’s headquarters in Auburn Hills, MI.

The auto maker also is “talking about some other potential entries in the coupe market,” Wicks adds, declining to offer detail.

Parent Volkswagen AGs said it will build a Passat coupe for the European market. Production tentatively is slated to begin in 2008 at the auto maker’s assembly complex in Emden, Germany.

Sales have been increasing steadily as Volkswagen marches toward its corporate goal of €5.1 billion ($6 billion) in annual pre-tax profit by 2008.

Core-brand U.S. sales were up 5.5% in June – VW’s eighth consecutive monthly increase in the world’s largest market.

Related document: Ward's U.S. Light Vehicle Sales by Brand and Group, June 2006

Through the first six months of 2006, U.S. sales rose 20% compared with like-2005.

In May, VW saw its global core-brand sales increase 18.1% compared with the same month in 2005. Through the first five months of 2006, global sales were up 15.4% over like-2005, to 1.38 million units.

Wicks anticipates solid U.S. results to continue through 2006 as VWA dedicates more resources to opportunities such as fleet sales, a strategy made possible by the pending arrival of Matthias Seidl, who becomes chief operating officer July 15

“He will be responsible for the strategic direction, definition and development of Volkswagen of America sales, including the development and enhancement of the dealer network,” says Adrian Hallmark, executive vice president, in a statement released by VWA.

Seidl, who joined the parent company in 1989 and has served the auto maker in various capacities around the world, will report directly to Hallmark.

Don’t expect VWA to expand its dealer body, but efforts will be made to offer greater support to dealers in expanding markets.

“The dealer network is about the right size for the market,” Wick says. “But we don’t have all the right dealers in all the right places. The market’s evolved. We had to add some dealers in Phoenix, because the market has grown exponentially.

“Conversely, there are some other markets where it hasn’t made as much sense to have the number of dealers we had in the past.”

'06 Rabbit's 2.5L 5-cyl. engine is rated at 30 mpg highway.

However, caution is order of the day.

“A key consideration for us is dealer profitability,” Wick says.

“We need to make certain we’ve got dealers in markets that are substantial enough to support the dealers, so they can get a good return on their investment; which will then encourage them to reinvest into the franchise, which will make it better for everybody.”

Despite the pending lull in VWA’s diesel offerings, fuel economy is expected to push U.S. sales as prices inch up toward $3 per gallon.

The national average price for a gallon of regular-grade gasoline curently is $2.94, according the American Automobile Assn. This time last year, the average price was $2.22.

“Fortunately for Volkswagen, we offer a lot of fuel-efficient cars,” Wicks says.

Just as fuel economy will be a significant part of VWA’s marketing message behind the Rabbit, so will value.

According to Ward’s ’06 segmentation, the car’s $14,990 base sticker is not the lowest among its competitors. So VWA will stress its lengthy list of standard equipment.

Related document: U.S. Car and Light Truck Specifications and Prices, '06 Model Year

Included among the Rabbit’s standard features are side, front and head-curtain airbags, power seats and a pollen filter. Electronic stability control is a standalone option at $450.

Powered by a 2.5L 5-cyl. engine that makes 150 hp at 5,000 rpm and 170 lb.-ft. (231 Nm) of torque at 3,750 rpm, the Rabbit – on sale now as an ’06 model – is rated at 22 mpg (10.7 L/100 km) in the city and 30 mpg (7.8 L/100 km) on the highway.

Based on VW’s PQ35 platform, which also shoulders the Golf in Europe, and the GTI and Jetta line, the Rabbit also features a 4-link, independent rear suspension. This contrasts with its predecessor, the Golf, which was equipped with a torsion beam rear axle.

“It is a more costly rear-end than the previous generation,” says Paul Spevetz, VWA product marketing manager. “It’s interesting for the position of the vehicle, because this is a platform that is shared with the GTI, the GLI, even some of the higher-end Jettas. It makes it an attractive idea.”

Mum on full-year volumes, VWA expects to sell between 10,000 and 12,000 Rabbits this year. Also available as a 2-door, 4-door models are expected to account for 75% of Rabbit sales.

Already in showrooms, VWA has sold about 400 units to date.

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