VW's Phaetal Mistake
As predicted by the Spies in April 2002
After Luxury Drive, Volkswagen Breaks Down on Several Fronts
Highlights from the Wall Street Journal article:
The car, called the Phaeton, carries a $70,000 sticker price.
It's a Volkswagen -- the most expensive car ever to carry the brand. With its new sedan, Volkswagen AG last year joined the parade of auto makers trying to tap the luxury market. For Volkswagen, the Phaeton was to lead a bold bid to transform the company's middle-of-the-road image into that of a true premium player on a par with the deans of German engineering -- BMW, Mercedes-Benz, Porsche and its own Audi unit. But the company got a shock when only 3,009 Phaetons, a quarter of projected sales, moved off lots by the end of the year.
Recent recalls and poor showings in customer-satisfaction surveys have dented VW's reputation for quality, which is also critical to the luxury strategy. In the latest J.D. Power & Associates survey of new-model quality, Volkswagen ranked eighth among the major auto makers in the U.S. market. With few fresh hits in its lineup, and auto sales slumping in Europe and the U.S., VW's market share began slipping on both sides of the Atlantic. Once Europe's largest car maker in unit sales by a substantial margin, VW this year is only slightly ahead of No. 2, PSA Peugeot Citroën SA of France.
Bernd Pischetsrieder, a Bavarian who took over as chief executive at VW last April, vows to stay on course with the company's larger strategy, encompassing both the luxury end and the need to fill gaps in the product line. SUVs, roadsters and station wagon-minivan hybrids are coming in the next four to five years, he says. "The strategy of VW is not complete yet. We have only started at the top end," he says.
The luxury campaign was conceived by Mr. Pischetsrieder's predecessor, Ferdinand Piech, a grandson of Ferdinand Porsche, who developed the first Volkswagen for Adolf Hitler.
The outlook might have been brighter if new Phaetons were tearing up Germany's autobahns as VW had hoped. But the car wasn't even on the market. Packed with dozens of sensors and microprocessors and two miles of cable to control seats, surround-sound stereo and other features, the car's computer network kept crashing, pushing back the launch several months and sabotaging prelaunch marketing events. (BMW 7-series drivers…sound familiar?)
When the Phaeton finally arrived late last summer, buyers proved far more skeptical than VW had expected. It didn't help that the Phaeton was available only with an expensive V-12 engine or an underpowered V-6. A V-8 wouldn't be ready until this year. A V-10 diesel that VW had developed would also come, but had been earmarked first for the luxury SUV, the Touareg.
For VW dealers such as Autohaus M.A.X., in Offenbach, near Frankfurt, the challenge went well beyond engines. The dealership spent about $57,000 to set up a plush "center of excellence" where Phaeton customers could be pampered. On a recent Saturday, however, a man with two children was kicking the tires on a Golf wagon and a woman in a flowered skirt was looking at a Beetle convertible. The long couch in the center of excellence was unoccupied.
"The Phaeton has to work out its image first," sales staffer Anke Arlt said. "When customers sit in the car, they're convinced, but some say, 'Wait, there's a VW badge on the front.' They're afraid that their neighbors will think they can't afford a BMW anymore."
When the first sales reports reached headquarters in Wolfsburg in late summer, executives were shocked and finger-pointing began. Marketing executives griped that the Phaeton had the wrong engines. The production group shot back that marketing hadn't generated buzz. With the end of 2002 came the dismal figure of only 3,009 Phaetons sold.
Auto Spies perspective: Over the years auto execs (you know them...the guys making the big bucks, doing virtually nothing except playing politics and hiding within their companies the best that they can, for fear that no one finds out, that they are TOTALLY incompetent) have made some bone-headed decisions, but this one by Piech, is one of the all time beauties! A $70,000 VW sedan. Are you kidding? What’s next, the VW version of the Maybach? Here’s a suggestion…why don’t you get the Jetta’s and the Golf’s TO WORK CORRECTLY?
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