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(Sean Gallup, Getty Images)

On November 23, TV talk-show diva Oprah Winfrey gave keys away to each of her 275 audience members, good for a free 2012 Volkswagen New Beetle. Why would the German automaker give away a couple of hundred cars almost a year before they will be ready at a cost of an estimated six to seven million dollars? The company is just that anxious to pass Toyota as the top automaker in the world, and it is booking sales ahead.

Volkswagen, which has enjoyed iconic status in American culture since the 1960s, has been up and down in the U.S., as well as other major markets. But it is doing everything it possibly can to remain up and eliminate the downs. Besides making a splash on Oprah, it plans to spend $71 billion over the next five years to fill its showrooms across the globe with new vehicles it is convinced will be good enough to surpass Toyota in total annual sales volume.

The sales targets are ambitious, if not audacious. Volkswagen Group AG, based in Wolfsburg, Germany, which includes Audi, Spanish automaker Seat, Eastern European auto maker Skoda, Bentley, Lamborghini, Bugatti and Porsche, in addition to Volkswagen brand and commercial vehicles, aims to produce 10 million vehicles a year by 2018. Part of that goal is to sell one million vehicles in North America by the same year. Last year, VW produced 6.29 million, third behind Toyota and General Motors. But in the U.S., sales were just 213,000. It is on track to sell about 250,000 cars here this year.

VW's ambitious sales goals were already going to be a challenge given the difficulty of managing the eight brands it had in its stable. But last year, the company added Porsche AG, making it nine. That drama began with Porsche angling to buy VW. But when the scheme to finance the deal fell apart with the global downturn in the markets in 2008, VW turned the tables and acquired Porsche. That German industrial opera played out for almost two years, and the result is that management will again be challenged to integrate another new company into its operations.

It's a big strategy for Volkswagen, but is it a smart one? Former Volkswagen of America marketing chief Steve Wilhite, who has held chief marketing posts at Nissan and Apple Computer, and run Hyundai Motor Sales, says the sales target is ambitious but achievable if VW can re-order its priorities.

"They need to stop thinking about being the biggest and focus on being the best. Being the biggest didn't work out too well for GM and it's not working out so well for Toyota either," says Wilhite. He notes that when a company focuses on quality first, sales usually follow. It rarely works the other way around.

VW aims to pass Toyota Motor Corp., as the world's top-selling automaker by 2018. Toyota sold 7.81 million vehicles globally in 2009, down 13 percent from 2008.

"This new delivery record is an important milestone for the implementation of our Strategy 2018," says VW Group CEO Martin Winterkorn, referring to the group's plan to sell more than 10 million cars by that year.

Standing between VW and Toyota, though, is a resurgent General Motors, which sold 7.48 million vehicles globally in 2009, down 11 percent from 2009. Ford ranked a distant fourth last year, with 4.75 million vehicles sold around the world, an 11 percent drop from 2008.

In the U.S., Volkswagen is trying to put years of financial losses behind it by readying an assembly plant in Tennessee that will build at least two kinds of vehicles. That will insulate the company somewhat from the losses it incurs because of currency valuations.

But there is more. Volkswagen is on a sweeping campaign to make its cars better priced, better sized and designed to appeal more to the masses than just the niche audience that likes its German engines, or perhaps the diesel-powered cars VW has long sold.

The new redesigned 2011 Volkswagen Jetta, for example, historically the company's top-selling car, has been made larger, with a bigger backseat and a lower starting price then its predecessor. The mid-sized sedan VW will build in Tennessee starting in 2011, probably to be called the Passat, is being designed to be priced competitively with the Honda Accord and Toyota Camry. The current Passat costs thousands more.

"Volkswagen is facing a classic dilemma," says independent marketing consultant Dennis Keene. "Its faithful audience that likes what it is isn't large enough to be profitable, but it will risk losing those customers if it becomes too bland and conformist in order to chase the masses."

The New Beetle that was given away to Oprah Winfrey's audience might not provide the same boost that the original New Beetle did when it launched in 1999. In 1994, when the New Beetle was shown at the Detroit Auto Show as "Concept 1," Volkswagen of America was on the verge of pulling up stakes in the U.S. because of terrible sales and huge financial losses. But the publicity surrounding the idea of a "New Beetle," helped drive showroom traffic and sales of Golfs, Jettas and Passats. Sales went from fewer than 50,000 in 1993 to 355,479 in 2000.

But the second edition of New Beetle is bound to pack less punch. The car has been restyled to be less soft and bulbous, the chief criticism of the one VW stopped making in its Puebla, Mexico, plant in 2009. The more chiseled and slightly more muscular lines of the car may attract more male buyers to the car (the old one drew more than 70 percent women), but will it sell more than 50,000 a year?

Volkswagen is not just counting on a surge in the U.S. to achieve its global sales target. It also has a lot of ground to make up in Asia. In India, consumers now buy about 2 million cars a year; Southeast Asians about 1 million. VW is lucky to sell 20,000 cars a year in each region. To catch up with Honda and Toyota in these markets, VW has teamed up with Suzuki Motors, which has a stronger presence in these markets, as well as a better knack for making small cars profitably. VW bought a stake in Suzuki last year to access the company's small car technology. In China, VW will add or freshen 20 models by late 2011. The goal is to double VW's Chinese retail network to 1,600 dealers in five years and sell 2 million cars.

Why the urgency to sell big? In the auto industry, profits are realized when a company can spread the cost of technology across the greatest number of unit sales. This is why Toyota, the industry leader in this practice, was booking in excess of $10 billion of profit a year until recently.

VW's big eyes for sales and status is also cultural. The company was formed in the aftermath of World War Two. The original Beetle was designed by Ferdinand Porsche, at Adolph Hitler's behest, to be affordable to the average working German, and catch the country up with the U.S. The engineering of the Beetle served as the underpinnings of the German "Jeep" and many other military vehicles. After the war, the auto company formed to sell Beetles, Volkswagen AG, climbed gradually to be a force in the European and ultimately the global auto industry. The German State of Lower Saxony still owns a major stake in VW, a legacy to its post-war founding. VW's former CEO and current supervisory board chairman Ferdinand Piech, is the grandson of Ferdinand Porsche. A billionaire, Piech, 73, has long been super-competitive and would like to achieve world sales leadership in his lifetime.

Most analysts agree that Toyota's recent problems with falling profits and vehicle recalls began a few years ago when it decided to overtake GM in global sales. That could have been a lesson for Volkswagen to chase quality and profitability instead of sales. But the German automaker, as Oprah Winfrey viewers found out, is out to dominate the global auto industry even if it has to give the cars away.


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  • 158 Comments
      Kotalik
      • 6 Months Ago
      I agree with most who say that VW is a good car but to surpass the American made is ridiculous. That is where the American companies have gone wrong. Quit making parts in other countries and bring the jobs back home and then see how fast the economy will turn around. Give people more bang for the buck and will purchase everytime. If everyone was not so concerned with the profit line and actually make a product that was good and reliable, all would be happy.
      • 6 Months Ago
      Americans are so stupid they probably will continue to buy JUNK from VW and Toyota. Advertising sells everthing even our fearless leaders. Crooks to the max.
      ambacengineering
      • 6 Months Ago
      VW was priced higher than comparable Japanese models, but you got more for that. You get interior style and materials, and better handling. So now VW will cut prices by cheapening the interiors, and designing in cheaper suspension and brakes. Now you can pay the same for a a VW as you would for a HOnda or Toyota, except they still (?) have good quality reputations, and VW doesn't. So if there there is no longer any VW design advantage, people will simply continue to buy Japanese (or Korean).
      • 6 Months Ago
      I think that VW does indeed have a good chance to pass Toyota in the near future due to the recent flaws in Toyotas causing their massive recalls and safety issues. VW does build a good car and has been around for ages, so brand recognition is not an issue. What does matter to consumers is the quality put in to their vehicles, the cost of maintainence, and their resale values. Face the facts. These days we all are trying to make our dollars stretch to the max and we need products that we invest our hard earned money in to go the distance and not need to be replaced every 3 to 5 years. Most people are lucky to keep their jobs for 3 years the way the economy is going. So making vehicles that have a long shelf life and that allow us to keep them longer ,is an attractive incentive to "US", the consumers.ie; if a product we purchase doesn't empty our pockets with expensive maintainence bills and instead helps keep money in our pockets over the years. Obviously it will attract more buyers to that particular product. We all want a vehicle that won't kill our pockets in these three areas. So if VW pays attention to the people and puts out vehicles with these qualities in mind? Then VW does stand a good chance to inherit the top position. I have owned products from GM and Toyota in the past and my views are mixed but over all. They were pretty good cars and Toyota had the better quality of the two in my opinion. A VW I have never owned but a family member of mine did and loved the car she had but hated the cost of maintainence. She said it was pricey,but did appreciate the great service she did get when ever she did take the car to be serviced. VW did stand by their product and she in fact did purchase another VW when it was time for her to trade in her vehicle. She stated that yes...she did find it expensive to maintain her vehicle but it was a small investment that did give her peace of mind that her car was in excellent operating condition everytime she went to turn the key and drive anywhere she wished to and not be worried about it breaking down. So if VW is reading this? Hear "US" out. You have a good product that could be made a "Great One" if you just make the service and maintainence a bit more inexpensive, as well as a car that will last longer. So focus on "Quality" and not quantity. Quality always sells better and high numbers don't mean anything in the end if they are plagued with recalls. Ie; Ford during the 90's,Toyota in the last 3 years. Pay attention to the consumers for your best advice and listen to what "we" want. After all...Volkswagon I think still means "The People's Car" right?
      bigwave48
      • 6 Months Ago
      Early in my life I bought American. Ford, Plymouth, Chevy's, These cars did not last. They all had problems. Then around 1975 I bought a Corolla, It was a egg beater, but it lasted and lasted, and never was in the shop, Then I bought a 1986 Camry, my wife but 300,00 miles on it and gave to my daughter who drove another 50 thousand. The I bought a 1995 honda accord, same thing ran that car forever, gave it to my son, he drove it all thru colllege. The was still able to sell it. My wife now drives a 2007 Toyota Camry, So far so good, It runs like a champ, and has never had a problem , it has over 85,000 miles on it. I'm sold on these cars. If I was rich , i could afford to buy a Ford, and not worry about repairs, but i'm a working guy, and every buck counts.
      mrobin1863
      • 6 Months Ago
      Coming from someone with 45 years experience in the automotive industry, I can tell you VW will never be able to compete as it stands now. Like all European cars, they are overengineered cars that are expensive to build, expensive to repair, and are no better mechanically than other vehicles on the road. The problem is their corporate engineering mentality, and that won't change and won't allow them to build a car that is the same price as the competition, yet no better functionally. People would be willing to pay more for "better", but not for one that is the same. GM and Ford are building the best value right now, and a European maker will never be able to compete without drastically changing the way they think. Honda and Toyota are suffering from the same thing US car makers suffered from in the seventies (our stuff is better no matter what syndrome). Watch for Hyundai, Kia and TaTa motors (India) to eat their lunch!
      nomochimchim
      • 6 Months Ago
      next ,aol will try to convince us mcdonalds is superior to ruths chris. lmfao
      • 6 Months Ago
      And to the people constantly shouting, "BUY AMERICAN." Please. This country has long since been sold. It isn't just automobiles. Look at all the clothes in your closet. They're all made in Sri Lanka, Vietnam, India, etc.
      Robert Pinto
      • 6 Months Ago
      I can't speak for the new VWs, but I drove them from 1964 until 1994, and they were incredible. My last one had 202,000 miles on it when I bought it, and had defied the young guy's attempt to destroy it! Some 300,000 miles later, it had been totalled in a rear end collosion, but when I gave it to a needy person as I left the state, it still ran perfectly! I owned 6 of them, all wonderful, and then came Ford into my life! Now, there is a vehicle that should go straight from the factory to the crusher! (Throw in the evil execs also!) I would never again accept an American car, even free! The proof is in the pudding, and my Toyota is now 11 years old, and still has yet to give me one problem. If the new VWs are not so hot, they have a lot of company!
      lthrnck68
      • 6 Months Ago
      Bring back the original Beetle with the rear mounted air cooled engine.
      • 6 Months Ago
      i have sorry to say owned three vw"s all crap badly built and just bad allover I don't know why I bought a second or third one, I'm probably an idiot.
      scuba4fish
      • 6 Months Ago
      I would never own a Volkswagon. I have a friend who owns a transmission shop. Volkswagon tries to corner the market on repairs that need to be performed during the life of the vehicle. You are almost forced to take the car to their dealership and the prices to fix the cars are outrageous. You will find it to be double what it costs to fix most cars. You need to look into this before considering purchasing a Volkswagon. Hope this helps
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