When you're done, check out

Yet, as an example of how contrary this kind of thinking is to those who have understood the VW brand as all-premium all the time, a journo during the roundtable asked if quality of Chattanooga vehicles would be up to snuff – the unspoken question being whether VW would look closely after the quality of these less expensive vehicles. Klingler's answer was "It's a Volkswagen," and anything made in Tennessee has to meet Group standards.

The same journo followed that up with a question about "low-priced cars," at which point a slightly testy Klingler interrupted to say, "There is no low-priced car – we're just competitive in the segment. And why should it be different?"

We've doubled volume [of the Jetta], transaction prices are better than the previous model, we had 90% better sales last month, and owner loyalty is up.
Back to those drums, though, this is when the VW faithful start beating them, but perhaps to no avail: sales are the currency of this conversation, and based on that all VW has to do is point to the figures.

Said Browing of the new Jetta, "The median price has gone up – we're selling more units above $19,000 than ever before, but it hasn't shifted the center of gravity [in the segment]. Look at the median price of the Jetta versus the Honda and Toyota – there's a $3,000 premium at the Jetta's median price."

Added Cervone, "We've doubled volume, transaction prices are better than the previous model, we had 90% better sales last month, and owner loyalty is up." March and April of this year were record-setting months for Jetta sales.

Jetta and Passat spearhead the sales push, but that doesn't mean the rest of the line-up will hop in the segment-penetration pool. When asked if VW planned to engineer offerings for the sweets spots of other U.S. segments, Browning answered, "What we're looking to do for our key car lines is make sure we're competing strongly in the core of their segments. With the Jetta and Passat being our two volume leaders, that gives us the pillars on which to build our business going forward. I don't think you necessarily roll that across all the vehicle lines – we're looking to selectively penetrate more deeply into certain segments in the U.S. market... As we grow the business it's very important that we go deeper, not just broader, into certain segments."

The intended takeway: there's still a VW for brand mavens, and at least when it comes to the Jetta and Passat, now there's one for almost everyone else, too.


COMING BACK TO THE U.S.

When we spoke to Krebs about the genesis of Strategy 2018, it was uncanny to hear him use the same kinds of terms that we heard from Jaguar's Global Brand Director Adrian Hallmark only a couple of months ago. Hallmark spoke of Jaguar having been a British brand that exported cars, but was now moving to be an international carmaker building vehicles tailored to specific markets.

Krebs said, "We used to create one car for the world. Now we need not one car for the world, we need plenty of cars for each market." He dates the change in the company attitude to about ten years ago, when VW began plotting factories around the world (it has built seven in the past five years). "From a more export-driven company we moved to a company that produces cars in their markets, and we make cars that have the flavor of the people in the market."

Volkswagen Chattanooga factory overhead

That seemed to be a guiding principle for the rest of the world and not for the U.S.; while VW was fortifying other outposts, its U.S. dominion suffered in all kinds of ways. Said Klingler, "The problem for a time was our focus on other regions – we haven't had the same focus on the U.S. over the past 15 years. We want to become very much more relevant to U.S. customers."

During those 15 years, the U.S. seemed to get cars that were what the Germans thought we should have, as opposed to what we wanted.

"The customer is right to say 'I can't buy your car because I can't put my cup in it.'"
Rainer Michel is the VP of product marketing and strategy-based in the States, he works with Germany to determine feature specs. "We cannot just ignore North America, and this is about respect for the North American market. Even with a thing like cupholders, the customer is right to say 'I can't buy your car because I can't put my cup in.'"

With the U.S. eclipsed as the world's number one market and still wobbling back up to its economic knees, the timing of VW's return could be seen as regrettable, but the market remains crucial.

Klingler's take was utterly professional: "America is for us an absolute target market. The U.S. market is competitive, very crowded, and we need to be present in the biggest markets."

Rainer Michel started off with the professional aspects, saying, "If we wanted to continue to grow this, we had to take care of the U.S. market – ten or eleven million cars is nothing anyone can ignore."

Worker assembling 2012 Volkswagen Passat

Eventually that turned personal: "When I'm in Germany I see importers and I think 'What are you doing just selling and making money here? If you want to make a difference you have to be a company in the area." He added, "The leadership, they take this personally – if we want to be a big player, we have to prove we can succeed around the world. The proof of what Dr. Winterkorn wants to do is in North America."

There is no need to fool ourselves, though – it is the profit motive and a euro worth almost $1.50 at the time of writing that underpins the enterprise. The company hasn't posted a profit in this market since 2002, making this an enormous investment in hope of gravy that it admits is still a couple of years away. "We believe in about 2013," said Klingler, "it will be possible to arrive at a profitable business case in the United States."

"You don't build a plant then walk away in two years," said Cervone. "The facility helps because 85 percent of the content is locally sourced. That gives us huge exchange rate protection, you can put content in the car that it deserves and you can protect pricing."

2012 Volkswagen Passat

That mention of content is expected to make the plant pay off for U.S. buyers as well. Said Michel, "Production can be localized and at the right volume. From this we can create our own car line features that we can add to other lines, and then have cars for volume, SUVs, emotional cars and halo cars."

The cotter pin supporting the weight of the endeavor: the Passat. Said Klingler, "With the new engine plant in [Silao, Guanajuato] Mexico and with Puebla we have a big North American exposure. All is depending on the success of the Passat." And he appears to be optimistic, "We want to continue the success story we interrupted for a time."


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    • 1 Second Ago
  • 51 Comments
      Lamborrari
      • 3 Years Ago
      Impressive how quickly they built the factory. The next-gen Tiguan will be build there. Glad to see VW is taking a big initiative to solidify their position as America's mainstream European automaker. Trying to position themselves upscale only worked for so long, and never turned a profit.
        ChrisH
        • 3 Years Ago
        @Lamborrari
        Frankly if they don't offer the next gen Tiguan with a diesel they can keep it.
      razorpit
      • 3 Years Ago
      "You don't build a plant then walk away in two years," said Cervone. No, you do it in ten. Google VW New Stanton for those who don't remember....
      creamwobbly
      • 3 Years Ago
      Drum brakes and cupholders? Phthalate-free plastic? Wow, you guys need to get some priorities.
        tantareanujellob
        • 3 Years Ago
        @creamwobbly
        Seriously. Who still makes cars with drum brakes? Even the Koreans stopped doing that.
          John
          • 3 Years Ago
          @tantareanujellob
          uh, Honda Civic, Toyota Corolla for starters. Not enough of a trend for VW to do it? Mmkay, whatever.
          • 3 Years Ago
          @tantareanujellob
          [blocked]
          • 3 Years Ago
          @tantareanujellob
          [blocked]
      tantareanujellob
      • 3 Years Ago
      Too bad all their cars go up in flames. I hope the same thing doesn't happen to the plant. I didn't seen any fire extinguishers in those pics. Not a good sign.
        rocketmoose
        • 3 Years Ago
        @tantareanujellob
        This is a post about VW, not Ferrari.
          tantareanujellob
          • 3 Years Ago
          @rocketmoose
          http://www.youtube.com/watch?v=tmGOIb1K7Rk http://www.youtube.com/watch?v=RJ1h2LmFVEU http://www.youtube.com/watch?v=d2Fq9G-59fY
      tantareanujellob
      • 3 Years Ago
      This car looks shockingly cheap in person, more so than the Hyundai Genesis. They'll sell a bunch to blind people.
      tantareanujellob
      • 3 Years Ago
      How long be before US made Passat recall hits the news? Who wants to take bets?
      MAX
      • 3 Years Ago
      This car looks shockingly expensive in person, more so than the Hyundai Genesis. They'll sell a bunch.
      ccweems
      • 3 Years Ago
      You will know VOA is serious when they build a line in Tennessee which is substantially exported. Look at the many models built by BMW and MB in the US which are sold in other countries. This is the German model. The Japaneses model involves making US specific models in the D Segment (Accord, Camry) but largely importing the remainder of the line as they are sold in other markets (ignoring trucks). If VW wants to slug it out in this segment having a body is only a start. VW does not offer a competitive I4 engine. The 2.5l is a boat anchor which is only sold in the US (why?). Next it has to get far greater reliability, you know something at least as good as the Koreans. This brings up a point. How did the Hyundai over the past few years initially introduce a POS (hatchback only at intro) and now they have a broad range of cars and SUV's which are more than competitive in every segment they compete? Added to this is the 100K warranty which has come at little cost to the manufacturer as the cars rarely need repair. A common belief now held by most German car owners is that you trade it in before the warranty runs out. Failure to do so can expose you to automatic transmission repair costs that not long ago would buy a whole car ($9K for a BMW 7 series auto tranny). GM turned to 100K warranties to win back customer loyalty while working hard in the background to insure that such warranties wouldn't break the bank. Were VW truly bold it would introduce 100K warranties however the problem I suspect is that VW truly doesn't know how to engineer a car that could be built to that standard. Toyota and Honda don't offer such warranties however their customers know often by personal experience that their cars will go for 150K miles without significant repairs. VW has been struggling for the past few years to raise itself on the bottom of the reliability listings to a mid pack level at best. This is not a US phenomenon. European versions of Consumer's Report have consistently found VW and Audi cars to be far worse than average. All in all there doesn't seem to be much that is different in the second coming of VW from the first. Much modified model to lower costs and suit American tastes, check. Non competitive engine with sub par performance, check. Much chest pounding about long term commitment to American manufacture, check. One thing, the Jetta which was 97% North American sourced sold well even though it was priced above the competition. In consideration of its expected low cost of manufacture ($7/hr Mexican wages) why couldn't it be sold at a more competitive price? And while you're at it why didn't they just expand the Puebla plant rather than start up the Chattanooga plant?
        • 3 Years Ago
        @ccweems
        [blocked]
        ICantDrive88
        • 3 Years Ago
        @ccweems
        Best post of the day! Maybe I've ever seen in my life! Coming from much personaleperience owning a VW GTI with many problems and owning numerous Japanese and Swedish cars, I agree 100%. I traded the GTI before the warranty expired (luckily it was back when they had 4 yr/50k which they got rid of - another issue with VW) in fear of what could happen to the engine/DSG tranny if it was on my own coin.
        • 3 Years Ago
        @ccweems
        [blocked]
        • 3 Years Ago
        @ccweems
        [blocked]
        • 3 Years Ago
        @ccweems
        [blocked]
      tantareanujellob
      • 3 Years Ago
      Too bad all their cars go up in flames. I hope the same thing doesn't happen to the plant. I didn't seen any fire extinguishers in those pics. Not a good sign.
        • 3 Years Ago
        @tantareanujellob
        [blocked]
      Basil Exposition
      • 3 Years Ago
      With all the abandoned industrual sites that mar every state in our nation, it's really a shame that VW chose to tear up a forest to build their new plant. Those arial photos really show the damage they have caused to this formerly beautiful and natural part of our state. And then they try to tell us the factory is green: http://thinkblue.vw.com/vw-chattanooga-infographic/ Talk about greenwashing! There is nothing green about greenfield development, especially on this scale. Shame on you VW.
        • 3 Years Ago
        @Basil Exposition
        [blocked]
        • 3 Years Ago
        @Basil Exposition
        [blocked]
          KaiserWilhelm
          • 3 Years Ago
          YEAH GUYS LETS DESTROY ALL OUR TREES SO WE CAN BUILD SUB-PAR AUTOMOBILES WOOOO 'MERICUH!!!
        Tall Tex
        • 3 Years Ago
        @Basil Exposition
        There were probably multiple factors in the decision. One of the biggest factor probably came down to environmental liability. The government (EPA) won't necessarily grant exemption from previous environmental damage just because you use a brownfield site; you might be able to get a alternative land use grant, but in the end VW would still be liable for the clean up of the old industrial site. While you could establish an existing baseline condition of the hypothetical industrial site, at the end of life for the plant, VW could still be liable for cleaning up the area to ambient or background conditions. Now, if they start from a greenfield site, as selected, the company can work to design a facility that has a greener footprint. This is where you will likely see some of the LEED green building practices (Leadership in Energy and Environmental Design). What you probably don't see are the offsets that VW may have to do in order to secure the location, while we are clearing some forested land for the plant, we will work to preserve or extend the range of protected areas at another location - typcially at greater than a 1:1 ratio. There may have been some existing industrial sites the company may have considered, but the potential environmental liability would typically be built into the cost of the plant. So, if you were to choose an existing industrial site, you would factor in some of the decommissioning and remediation costs into the project. These costs could be higher in an already disturbed location, so if you can control the potential environmental liability associated with lifetime of the facility, you could better control the cost of the facility as a whole from cradle to grave.
      • 3 Years Ago
      [blocked]
        rtkewley
        • 3 Years Ago
        If fact, you can add the Appearance Package ($2695.), which includes a six speed automatic, so the cheapest Passat with an auto is $22,690. This makes it roughly competitive with the market leaders on price...but likely not on quality.
          • 3 Years Ago
          @rtkewley
          [blocked]
        eeliezerp
        • 3 Years Ago
        dont be stupid if you do your reseach to get auto trans on the passat is 22500 and it has auto climate control dual zone and blue tooth standard and auto headlights .the accord or camry does not offer those options on the base model my wife has an accord 2010 nice car but is not even close to the passat .I drove the passat and the car kicks the accord and camry in ride quality and size .it feel more upscale then the japanese cars
      Scr
      • 3 Years Ago
      Notoriously poor quality cars now built in the US, great. The UAW is targeting this plant, too...and if they do succeed in unionizing, poor quality will become abismal quality. Too bad they went downmarket as well, with the cash they would save by building it here as opposed to Germany, you think they could have kept it nice and still lowered the price.
        J
        • 3 Years Ago
        @Scr
        > Notoriously poor quality cars now built in the US It's a perfect match for notoriously poor quality owners like you. > The UAW is targeting this plant, too. In a Right-to-Work state like Tennessee, good luck with that... http://www.nrtw.org/rtws.htm
          1guyin10
          • 3 Years Ago
          @J
          I worked in a United Steel Workers organized plant in Chattanooga several years ago. They had a whopping 41% participation rate. The only thing I could see that they accomplished was to send a few of the officers to Las Vegas for a convention every year. The 41% was mostly employees that were with the company from when it was originally organized back in the early 80's. VW probably will not fight the UAW like some other manufacturers would, but even if they get in the employees are likely to be lukewarm toward the union. Why pay dues if you don't have to?
          Scr
          • 3 Years Ago
          @J
          I would just never own a VW, so strike one right there. I know plenty of people who have or HAD them, and each one, without fail....crapped out on a regular basis. And it was ALWAYS some expensive electrical gremiln the shop could not fix right the first time. One gentleman I worked with had a Jetta that cost him all of his vaction time for the year because he took it every time he needed to go to the shop with the car and could not get to work. Most I know who had one will never buy another one because of the reliability.
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