VW plans $7B U.S. investment to boost brand

Volkswagen Group, which has struggled for years to increase its foothold in the U.S., announced plans to invest $7 billion here over the next five years as part of its plan to become the world's largest automaker by 2018. 

Ahead of this week's North American International Auto Show in Detroit, the German automaker also unveiled plans to begin producing a mid-size sport-utility vehicle for North America in 2016, which analysts have said it needs to gain market share. Sales at the group, which includes premium brands Audi, Porsche, Bentley, Bugatti and Lamborghini, have more than doubled since 2008 and set a record of more than 600,000 deliveries in 2013. Its flagship Volkswagen brand, however, has languished, tumbling more than 5 percent to about 374,000 as of November 2013, while the overall market posted gains of more than 8 percent.  

Volkswagen replaced Jonathan Browning as the CEO of Volkswagen Group of America last year with Michael Horn, and is discontinuing some models and refreshing others. The automaker has big plans for the U.S. and expects to sell 1 million Volkswagens and Audis here by 2018.  

"We are taking up the challenge -- with confidence, total commitment and the necessary staying power," said CEO Martin Winterkorn, in a press release.

Some industry observers are skeptical.

"It may well be the world's biggest automaker by 2018 but I have some doubts as to whether it can double its U.S. sales to 800,000," says Sean McAlinden, chief economist at the Center for Automotive Research, in an email while attending the Detroit Auto Show. "The competition looks pretty tough down at the auto show today. The new Chrysler 200 looks pretty nice compared to the U.S. Passat for example."

In other news, Toyota Motor forecast that its U.S. sales would increase by about 5 percent to 2.3 million. Incoming General Motors CEO Mary Barra, who will be the first woman to run one of the Big 3 automakers, has also gotten quite a bit of media attention. And automakers are generally upbeat about sales, despite some lingering unease about the state of the economy. 

According to Reuters,  U.S. sales could rise as much as 5.8 percent this year, down from 7.6 percent last year and about half of the double-digit gains the industry enjoyed as the market rebounded from the lows in 2009.

  • Jonathan Berr

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