Volkswagen's Len Hunt: A new strategy
VW expects to introduce the wagon in the 2007 model year. It will market the wagon as a distinct vehicle and not as a Jetta wagon, said Len Hunt, executive vice president in charge of the Volkswagen brand in North America.
Hunt spelled out VW's strategy last week during an interview at the New York auto show.
The new vehicle is a key part of VW's comeback strategy in the United States, where it lost 930 million euros, or about $1.20 billion, last year. To protect itself from currency fluctuations, VW will cut its reliance on vehicles imported from Germany while doubling production in its assembly plant in Puebla, Mexico.
This strategy calls for the Jetta and its wagon variant to be high-volume vehicles in the United States. The Puebla plant, which produces the Jetta and New Beetle, will double production to 300,000 units by 2007.
Most of Puebla's production will be earmarked for the United States, although some vehicles will be exported worldwide. Hunt declined to estimate how many of the new wagons VW plans to produce.
Meanwhile, the Passat sedan and wagon will go upscale. VW will position them as upscale flagships, with lots of features and more power. The automaker hopes that even if it sells fewer Passats, it can make a profit on those vehicles.
"I am desperately trying to do more with Mexican production," Hunt said. "I have to be sensible with my Passat."
In the United States, VW has struggled with aging products, shaky quality and rising competition from Asian brands. But the company's biggest headache is currency; as the dollar loses value, vehicles imported from Europe become more costly.
Currency fluctuations have forced Hunt to back away from his original turnaround timetable. VW division sold 256,111 vehicles in the United States last year, down from 302,686 in 2003.
The company had hoped to sell 300,000 units this year and 500,000 units per year later in the decade. But as currency losses mounted, VW Chairman Bernd Pischetsrieder called VW's performance in North America last year "a catastrophe."
So Hunt said his top priority this year will be profits rather than market share. "I am pushing it out," said Hunt, referring to his sales targets. "When somebody was talking about sales of 500,000, they were not anticipating an exchange rate (dollar to euro) of $1.33."
VW is not likely to be profitable in the United States this year because of high launch costs for the Jetta and Passat, Hunt said. But VW should break even in 2006, he predicted.
Betting on wagons
The Jetta is VW's biggest seller in the United States with an annual volume of more than 140,000 units. That amounts to 40 percent of VW's U.S. sales - and now the company wants to expand Jetta's appeal.
VW is betting that the Passat and Jetta wagons will hit the market at a time when U.S. motorists are tiring of SUVs.
"We are going to have a strategy of dropping the Jetta and Passat wagon into a market that is asking questions about SUVs, maybe because of fuel price," said Hunt. Consumers that are drawn to European styling will take a fresh look at wagons, Hunt predicts.
The first of VW's new wagons will be the Passat version with awd and a 280-hp V-6 engine. Hunt sees that vehicle as VW's flagship. It debuts early next year. The Jetta-based wagon will follow.
Just as the wagon will be marketed as a distinct vehicle rather than a Jetta variant, VW is calling the luxury sport version of the Jetta the GLI. That vehicle goes on sale in six weeks and will be priced at about $24,000.
Hunt did not discuss the price for the wagon, which will be sold worldwide. The Jetta sedan starts at about $18,000, including destination.