VW Looks at a U.S. Factory

[tgagneguam]

VW Looks at a U.S. Factory
A new facility for VW and Audi could take the edge off the company’s currency woes.
by Jim Burt

A high-ranking Volkswagen AG executive says the German automaker is looking seriously at building an assembly plant in theU.S.

VW sales and marketing chief Georg Flandorfer, in an interview with Frankfurter Allgemeine Zeitung, said that steep losses at Volkswagen's U.S. unit this year - $1.34 billion - due largely to depreciation of the greenback has prompted serious talk at VW headquarters in Wolfsburg about building an assembly plant that could build both VW and Audi vehicles. A weak dollar means that VW will hard pressed to earn a profit in 2005.

This is a reversal of the company's position the last few years. Executives including chairman Bernd Pischetsrieder and board member in charge of North America Jens Neumann have both said often that they hoped to maximize production at the company's Puebla Mexico plant, as well as its facility in Brazil, before taking on the much higher cost proposition of manufacturing in America.

One VW executive told TCC that a decision could be reached in the first half of 2005 to go ahead with a plant, and then a search process would commence. The executive said that Canada would be a possibility as well, but that the company was somewhat less interested in building a second Mexican plant.

Flandorfer said the Audi Q7 SUV would be a logical candidate to build in the U.S. Relatively low volumes of the Audi SUV, though, would certainly mean that a VW SUV would also be built off the same platform in order to justify the investment in the plant.

VW, of course, previously manufactured its Rabbit and short-lived mini-pickup at a plant in Westmoreland, Penna. From the mid-1970s to the mid-1980s. VW had planned also to build Jettas at a plant in Sterling Heights, Mich., but cancelled those plans in the late 1980s when sales of Volkswagen of America kept sliding downward. Quality at the Westmoreland plant was a serious issue for Volkswagen.

VW, having come back from a near-death experience in the U.S. in the early 1990s, is again having a difficult time, though no one is talking about the brand leaving the U.S. market as they did in the early '90s. The company will launch a new Jetta, Golf and Passat in America over the next 15 months. VW, whose sales were down a whopping 40 percent in November, has suffered from an aging lineup and uncompetitive sales incentives, and a too-small ad budget and share-of-voice on the airwaves. Because of steep losses and the weak dollar, then company is conserving cash to launch the new products as they come out.

VW/Audi US Plant

[1BadPig]

They needed this about 5 years ago. Now the delay will cost them profit due to the unfavorable currency exchange rate.