By Frank S. Washington
Special to the AFRO
(October 22, 2009) - Volkswagen AG is making a major push to become the world’s leading automaker by 2018 and key to attaining that title is the company tripling sales in the U.S.
Even though the automotive industry is in the midst of a globe girdling sales plunge that has seen both Chrysler and General Motors enter quick-rinse bankruptcies, through July Volkswagen of America Inc., sales dropped almost 14 percent. When measured against the 32 percent drop of the overall U.S. auto industry, VW isn’t doing all that bad. The company which is headquartered in Wolfsburg, Germany brought almost 70 journalists from North America to the debut of the 2010 VW Golf. In addition to touting the compact hatchback, senior executives at dinners and receptions took almost every opportunity to emphasize their three pronged assault on the U.S. automotive market to increase sales from last year’s 223,128 to 800,000 by 2018.
It could be called the three Ps approach: product, positioning, pricing. Stefan Jacoby, president and CEO of Volkswagen of America, said, “We have to convince U.S. consumers on the reliability of our brand with high quality good products. They have to be fun to drive, safe, reliable and dependable.”
Indeed, Volkswagen is one the best known brands in the world, arguably because of the Beetle, which was the first successful volume import sold in the U.S. But over the last decade VW picked up a reputation for being quirky, having questionable quality and expensive maintenance costs.
In spring 2008, Volkswagen of America announced the Carefree Maintenance Program for its entire 2009 model line. There are no charges for scheduled maintenance for the length of a new vehicle’s limited warranty -- three years or 36,000 miles. Jacoby said the program is beginning to change customer perception about the reliability of Volkswagen products.
In 2007, Volkswagen’s retention rate, that’s owners who repurchased another Volkswagen once their lease ran out or their vehicle was paid off, was 29 percent; which is not good by industry standards. VW raised its loyalty rate to 40 percent last year and it has a target of 50 percent.
There’s a blizzard of product coming from Volkswagen in the next three years. Most notable will be a restyled Beetle and new midsized sedan that will be produced in the company’s $1 billion assembly plant in Chattanooga, Tenn., which is under construction. Production will start on the car in the spring of 2011.
“[Still] we have to carefully extend our model range,” Jacoby said. “We don’t want too many products.” He added that with the Volkswagen Beetle, the Eos (VW’s hard top convertible), the GTI high performance lineup, and R version of GTI very high performance “we have enough emotional products.”
Executives who were interviewed and those that gave presentations used terms like broaden the market, core brand and mainstream. Their point was that in order to triple U.S. sales in eight years, Volkswagen must significantly widen its customer base. “We’re looking for new advertising agency,” Jacoby said. “We have to build brand awareness and consideration.” VW has four new advertising agencies under review and it should make a selection by the end of the year. The company has already hired a new global marketing director, Luca de Meo. Hired away from Fiat, he’s only been with VW for two months. Nonetheless, de Meo said Volkswagen has got to move up on the shopping lists of American consumers.
“We’ve got premium cars and they have high technology content.” he said, “For us the issue is how to get Volkswagen bigger with and closer to core customers.” In effect, Volkswagen of America must reposition itself in the market.
The auto industry is global and today’s survivors are global corporations. Volkswagen is a market leader in China, Europe and South America. And the company wants to Like other German automakers which have built assembly plants in the U.S., Volkswagen says it will be inclusive. On its Volkswagen of America Web site the company says: To us, diversity simply means honoring equally all the backgrounds and points of view that make up the rich fabric of the American culture. We are a company of visionary and forward-thinking people; respect for our fellow citizens and fellow employees comes naturally.
In the past, Volkswagen was perceived as the builder of niche cars by American consumers with the Beetle and the Jetta leading the way. But those cars are mainstream vehicles in the European market and that’s what Volkswagen wants in the U.S.
“We need a halo car,” said Jacoby “The successor to the Beetle will be that car. It will be both a volume car and a halo car.”
The head of sales, marketing, production, prices, Christian Klingler said, vice president of Volkswagen global sales and marketing. “We’ve got good brand equity, people like us.” But these have been difficult times the last ten years.
Still, VW’s product line, its customer satisfaction, dealer satisfaction and loyalty rate have all improved.
“What we’ve done is take a step by step process,” Klingler said. “We have to make [American] consumers say, ‘yes, this is a car for me.’ It’s the right strategy but every day we have to improve.”