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Sagging sales spur rare U.S. incentives
Once-hot VW struggles

By
Christine Tierney / The Detroit News
Morris Richardson II / The Detroit News



Len Hunt was not even officially installed as the new U.S. boss for the Volkswagen brand when he found himself fending off a growing revolt from VW dealers.

At a meeting in early February, VW’s U.S. dealer representatives ticked off grievances for four hours: plunging sales, old models and the German automaker’s stubborn refusal to offer sales incentives to move the metal.

Just a few years ago, Volkswagen was among the hottest brands, with sleek new sedans and coupes — including the revived Beetle.

But now, some dealers are facing ruin. VW’s U.S. sales fell 29 percent in January, after a 33 percent slide in December. For all of 2003, U.S. sales dropped 11 percent.

In an amazing turnabout, Volkswagen is now making unheard-of deals to entice American customers back into its showrooms. VW has upped incentives on the aging Passat sedan, launched in 1998, to as much as $3,000. That’s six times more than it was offering a year ago.

After shunning incentives for fear of debasing the brand, VW is also doling out incentives on the 5-year-old Jetta — its best-seller — and even on the acclaimed new Touareg sport utility vehicle. It has slashed financing rates to as low as 0.9 percent, and improved leasing terms.

“The dealers were extremely professional, but they said, ‘guys, we really need a change,’ ” recalls Hunt, former head of VW’s thriving sister brand Audi.

He and Gerd Klauss, president of Volkswagen of America, flew to Germany three times following the February meeting to get face time with Volkswagen AG’s CEO Bernd Pischetsrieder.

“I think he reacted when I said, ‘If we carry on, we’re going to lose the confidence of our dealers,’ ” Hunt said.

Dealers are relieved. “Instead of a short-term fix to carry us through 60 or 90 days, they got a pool of money to carry us until the new Jetta and Passat come out next year,” said Al Gossett, owner of Gossett Motor Cars in Memphis, Tenn.

The new policies appear to be stemming the sales slide. Sales in March were down 18.5 percent, compared with a 30 percent drop in the first two months of the year.

Helped by humorous ads touting the cars’ engineering features, VW sales in the first half of April are running ahead of year-earlier levels, Hunt said.

The automaker still avoids outright cash rebates for customers. But with higher dealer incentives, lower financing rates and other bonuses at their disposal, dealers can offer monthly car payments under $300 — just slightly more than what customers would pay for similar Japanese cars.

Still, it’s going to be a tough year. With no new VW models hitting showrooms before February 2005, VW will struggle to match last year’s U.S. sales of 302,686 units.

After investing $2 billion in the past five years, VW’s 600 U.S. dealers are banking on a rebound next year, when VW replaces its top-selling models. It will roll out an entirely restyled Jetta in February and a new Passat sedan next summer.

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“...Prices on Big Three cars have come down tremendously,” said Dale Koelzer, sales manager at Mike Fox VW in Rochester Hills. “People look at you and say, ‘I understand that your product is superior. I like it better, but I’m going next door to buy the Saturn. It’s $189 a month.’ ”

Yeah, Dale, that's precisely why VW sales are tanking! Please! Bury your head in the sand and pretend the reason is merely the price differential between your products and Detroit's. Hmmm, maybe now that VW is offering incentives your sales will match last year's decreasing sales, though VW is off to an awful start this year. I predict incentives won't reverse the decline that dramatically.

I owned a Golf in the mid-90's and promised myself that after a summer of incredibly unreliable ownership ($1,000's of dollars spent on a variety of fixes in one summer alone is intolerable to a college student) and less than stellar dealership support, I would not be a repeat VW customer. I didn't switch to GM products for simple pricing reasons. And my guess is that others are not returning to VW (and Audi) for similar reasons.

When VW offers new products next year(!), I would imagine that the sales hemorrhage will at least slow, but not sooner than that, incentives or not.
 

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that's really too bad. i mean, i know most people here probably don't think so, but i've always kind of wanted to have a VW. they have some of the nicest designs for interior and exterior out there (both VW and audi) so i think it's too bad that they have such reliability problems. hopefully they remedy that soon.
 

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Originally posted by 3eb@Apr 19 2004, 02:19 PM
that's really too bad.  i mean, i know most people here probably don't think so, but i've always kind of wanted to have a VW.  they have some of the nicest designs for interior and exterior out there (both VW and audi) so i think it's too bad that they have such reliability problems.  hopefully they remedy that soon.
They do at least still have Audi cranking some good sales... A4 redesigned in 2002, A6 in 2000 (new design for 2005)... kind of tying them over... they'll be fine...

I do have to say that I drove my mother's new A4 and I loved the feel... hopefully it's not in the shop all the time...
 

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It about time the reality of VW's expensive, aging, technically inferior, and low quality products caught up with the myth created by their cleaver marketing.

Mark
 

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I would say quality problems are to blame for a lot of the sales problems VW is having. There is a lot of bad word of mouth and bad press about VW on the internet. I gave an account of my friends fathers VW Beetle 2000 Turbo on the other board on this issue. Its a great car but this year had a lot of problems or at least the one he got and most of the problems could have easily been caught if VW would have done some minor investigation. The window controls are one of them. How could it take a two months to break them with no abuse and VW couldnt figure it out with millions of dollars in its budget? Breaking window controls are posted on the internet because it happens in so many vehicles. Solution? Different design or about 2 more dollars in plastic. Why would VW make a 20k dollar vehicle look cheap for 2 dollars?
 

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I've been a long time fan of VW. There have been 2 old beetles and 3 new beetles between my wife and myself. My wife is thinking about another NB in covertable form. However quality is an issue IMO. Our NBs have had only minor issues with worn out vacume hoses and broken power window switches (very common on the NB) but I've heard of people having much worse problems. I think they've got issues down at that Mexico plant that they really do need to address.

VW's other issues include the Phateon and the exchange rate. The Phateon costs alot of money to develop. While it has sold fairly well in the US, it has been a complete dud in Europe. They actually spent the money to build a glass factory for these cars. The exchange rate is something else that is really killing them. The Euro is right now very strong when compaired to the dollar. In fact, VW actually released a report stating that they expect that sales will pick late in the year. They speculate that after the Presidential Election, interest rates will start to climb back up and the Dollar with strenghthen as a result. IMO, that forcast is dead on but they'll need new product and better quality to ensure their long term viablity.

BTW, have ya'll seen the new Jetta yet? IMO VW will grossly miss the mark with that car. It looks like a Corrolla clone. I predict it'll be a bust.
 

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Yea the new Jetta and Passat are both gonna be ugly IMO... BTW, hope the Mexican plant fixes its issues because they're moving ALL Jetta production there... considering it's VW's top seller, this could be a disaster in the making <_<
 

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;) Audi is seeing a sales boost because those record VW buyers from 1999 and 2000 are trading up from Jettas and Passats to A4s and A6s. VW has a bleek future if it is intent on pushing the brand to a status marque. I think they are great products, but why would I pay the price of a passat W8 when I can get an Audi? Its very presumptuous of the VW group to think that VW and Audi can split hairs and aim one brand to luxury and target Mercedes while the other targets sport and guns for BMW.
 

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Originally posted by svx92@Apr 20 2004, 11:25 AM
;) Audi is seeing a sales boost because those record VW buyers from 1999 and 2000 are trading up from Jettas and Passats to A4s and A6s. VW has a bleek future if it is intent on pushing the brand to a status marque. I think they are great products, but why would I pay the price of a passat W8 when I can get an Audi? Its very presumptuous of the VW group to think that VW and Audi can split hairs and aim one brand to luxury and target Mercedes while the other targets sport and guns for BMW.
Hmm... so I'm not the only person to feel this way... :lol:
 

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There was a report done that said much of VW's problems is that both the Passat and the Jetta are on the same tracking in terms of new car introductions. Those are there 2 most important vehicles sales volume-wise so having the new versions of both of them come out at the same time (both will be redesigned for 2005) causes a huge blip up in sales and then as the newness wears off the whole VW product line tanks.
 
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