VW Sets 2008 Breakeven Target for USA

11 January 2006

"We were one of - if not the - hippest brand in the States in the early 21st century," admits Adrian Hallmark, ceo of Volkswagen USA. "We want to get back to that exciting, must-have brand positioning we once had."

Hallmark's wistful admission was confided to the Financial Times at this year's North American Auto Show in Detroit.

But his plea might more constructively have been addressed to the Walt Disney Company with which, thirty-eight years ago, VW struck the planet's most spectacular product placement deal ever.

Disney's 1968 movie The Love Bug featured Herbie, a loveable, quirky VW Beetle with a mind of its own. It was a smash hit, that spawned no fewer than five sequels before the franchise finally petered-out in 2005

Trouble is, these days the average US and Canadian autobuyer seeks macho and roomy rather than cute and quirky. Hence Hallmark's problem.

VW lost close to €1bn ($1.2bn; £683.7m) in North America last year for the second year running. This year will be slightly better with losses "substantially" reduced with further improvement in 2007.

"But," concedes Hallmark, "that will only get us to survival. Beyond 2008 what I'm working on is product strategy in terms of more segments and opportunities."

VW's current problems stem from a triple whammy: poor timing of model switches (its two biggest sellers both changed last year); the weakness of the dollar against the euro; and an image of low quality.

With US sales of just 224,000 units last year, VW is still a 'marginal' brand in the bottom quartile of the J D Power survey of perceived automobile quality. Hallmark is aiming to make it back into the top quartile.

To this end, its advertising will become more "edgy". In September VW unceremoniously moved its $400 million North America advertising account out of Havas' Arnold Worldwide and into US independent Crispin Porter + Bogusky.

Demonstrating the new edginess was an event staged in Los Angeles last week when Golf GTIs were scattered around roads nearby the LA Auto Show site, surrounded by police cars and implying they had been pulled over for speeding.

Data sourced from Financial Times Online; additional content by WARC staff