Confidential

VW's Portuguese dilemma

The Portuguese government is eager for Volkswagen to make up its mind about the future of the Autoeuropa plant in Palmela.

Autoeuropa is vitally important to Portugal's economy. Ninety percent of its output is exported to other European countries. Last year that trade represented 11 percent of Portugal's export volume.

Palmela builds about 135,000 vehicles a year. The output is distributed exclusively in Europe by VW; Ford, which owned 50 percent of the factory until it sold out two years ago; and VW's Spanish subsidiary Seat.

Autoeuropa's current products are the VW Sharan, Ford Galaxy and Seat Alhambra full-size minivans.

But VW's situation at Autoeuropa is changing. Ford's 50,000-unit share of minivan production will expire at the end of 2004. VW, which has invested E2 billion in the venture, must replace the current product with one it can sell on its own.

The US market could be Autoeuropa's savior.

VW is reportedly studying a plan to build a new minivan in Portugal that would be exported to the USA. The new minivan would be based on the Passat.

To Portugal's economists, VW's product plans are important. Something will have to fill the hole that Ford will leave in 2004. The addition of a high-volume market such as the USA would more than compensate.

Renault-Nissan group?

It was interesting to compare the reactions of Renault's Louis Schweitzer and Nissan's Carlos Ghosn to a recent French magazine article.

The article predicted that the Franco-Japanese alliance would eventually evolve into a listed holding with Renault and Nissan as its two subsidiaries.

Schweitzer fiercely denied such a scenario would ever take place. 'There will always be a Nissan company listed in Tokyo and a Renault company listed in Paris,' he said.

But Ghosn insisted on the need to adopt a 'very pragmatic approach' and would not rule out anything.

Damage limitation

Donato Coco, the designer of the Citroen C3, says the auto industry may have reached a point where safety concerns are becoming overemphasized and counterproductive.

Because modern cars come packed with safety features, 'there's a risk drivers will become less cautious of crashing,' he said.

On general design trends, Coco doesn't think the height and weight of the typical car will change much in the future.

'But we could play with other parameters, such as width and length,' he said.

Just like Patrick Le Quement, Renault's chief designer, Coco sees a tendency toward simplification in interior design of cars.

'It is important to calm down,' he said. 'We're saturated with information.'

Hard targets

Carmakers - even those sharing expertise and resources - find it difficult to build cheap, small cars.

A well-informed source said the new small car PSA and Toyota are planning will cost about E7,500. That's not much below the E8,000 price of existing supermini cars such as the Citroen Saxo and Toyota Yaris.

As for the Renault and Dacia's planned E5,000 medium-sized car, Renault Chairman Louis Schweitzer is beginning to talk about the price as a 'stretch' objective.

In other words, it's a tough target you set to galvanize your troops, but don't necessarily expect to be reached.

Lutz's European role

It appears that Bob Lutz's role in Europe will be the one he didn't want at General Motors in North America - that of a senior adviser.

Although Lutz was named GM's vice chairman for product development, Saab and Opel product and design executives will report to their respective top executives, Saab CEO Peter Augustsson and Opel Chairman Carl-Peter Forster.

But Mike Burns, president of GM Europe, said Saab and Opel will receive 'valuable counsel and input' from Lutz.

'It's good input, and some of it will take some discussion,' said Burns.

GM CEO Rick Wagoner said Lutz's focus will be in North America, where design, engineering and vehicle-line executives report directly to him. But Wagoner said GM is 'not going to put a fence around Bob Lutz.'

You can reach Mark Rechtin at mrechtin@crain.com

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