Markets

VW's American Strategy: A New Midsized Car, Lots of Jettas, and Tripled Sales Goals

By jim motavalli

Updated on: January 7, 2011 / 7:53 PM EST / MoneyWatch

If Volkswagen is going to meet its oft-expressed goal of selling 10 million cars annually by 2015 (from approximately seven million in 2010), a big hit in the U.S. is really essential. Until the new Beetle is revealed in the spring (that was its silhouette you saw on the Oprah Winfrey show, below) and hits showrooms in the fall, VW is depending on sales of the newly affordable $15,995 Jetta. But it also has a secret weapon in the form of its Passat-replacing mid-sized sedan, code-named NMS ("new midsize sedan"). The wraps come off the NMS at the Detroit Auto Show next week.

The NMS, which in spy photos has rather ho-hum styling and looks like a bigger Jetta, is to be built at VW's new flagship factory in Chattanooga, Tennessee, and will be for North America only. The factory, which I saw as a work-in-progress last year, opens in April, and dealers are expected to get their first few NMS cars in June. The car goes wide next fall. It's about time VW deep-sixed the aging Passat, which always seemed like a Euro-market car to me.

Volkswagen' Corey Proffitt told me that the spy photos aren't accurate, and that the car he's seen has some distinct differences. He also says that the company expects the NMS and the Jetta will be the company's volume leader, with the new Bug trailing behind. VW will announce December sales Tuesday, but it was at 233,000 through November and so it's likely to exceed its goal of 250,000 U.S. sales in 2010.

VW's U.S. goal is 800,000 (plus 200,000 Audis) by 2018. Can VW really triple American sales in seven years? It's going to need the Jetta and NMS to be substantial hits. Jetta sales are running around 20,000 a month right now, a mix that includes both new and old models. The station wagon iteration is going to remain on the older platform, at least until VW announces otherwise.

Some year-end assessments, including those at the New York Times, complained about the "decontenting" of the Jetta to get it under $16,000. Jerry Garrett complained, "Volkswagen admirably cut the price -- along with much of the character and features of the previous version. Someone in VW's marketing department may have decided that since Americans eat junk food, they will snatch up the automotive equivalent of a value meal."

Decontenting is a bad strategy if it downsizes the image of the car in the public's imagination. Proffitt says that early indications are that consumers are ordering the SE version with a plethora of options, not the loss-leading stripper. The sportier GLI version, with an independent rear suspension, will be introduced in the spring.

VW has been through some organizational upheaval in North America, with the departure of superstar U.S. chief Stefan Jacoby for Volvo, and the arrival of new British-born CEO Jonathan Browning last September. Perhaps its extension of a new five-year contract to global CEO Martin Winterkorn was a way of keeping things stable at the top. Winterkorn is in expansion mode, having already added truckmaker Scania and eyed an acquisition of Alfa-Romeo from Fiat.

I saw Browning in action on the eve of the Los Angeles Auto Show, gamely sharing a Santa Monica stage with a Gossip Girl star as the company introduced a new EOS hardtop convertible. I didn't get the impression he loves celebrity events (Katy Perry kicked off the Jetta), but he was good at keeping an eye on the prize.

"We're betting heavily on the U.S. market," he said then, "with models specifically tailored to American needs." VW has invested $4 billion in the U.S., he said, and that's clearly in anticipation of a big payoff on a relatively few models. If VW succeeds, Americans will include the VW dealership for a look at the NMS when they take a mid-market tour that includes tire kicks of the Accord and Camry.

"The NMS will be the first time a German-engineered car will be offered at this price point, with German features, and incredible fuel savings with the [diesel] TDI engine," said Proffitt. Emphasis on the German there, but of course the car will be built in Chattanooga. So it's American, too, waving two different flags.

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Photo: Volkswagen, Jakeforblog