VW to Hike North American Adspend and Sales Discounts

27 July 2005

Volkswagen's message to North American auto dealers came through loud and clear. Even as far afield as the boondocks of the Lone Star state.

Quoth Bobby Rodriguez, president of Boardwalk Autos in Plano, Texas: "The big message I heard was that 'We're getting back to the basics of stylish, German-engineered cars that are affordable'. The proverbial proof is in the pudding, but I think we have a good chef in the kitchen."

And the good chef? None other than Wolfgang Bernhard, new chairman of Volkswagen who spelt out his plans to revitalise the automaker's North American operations, not only to Rodriguez but a convention of several hundred other North American VW dealers assembled in Dallas.

It is widely recognized that the once highflying German brand has recently lost its way in North America, victim of the insurgent Japanese marques and the profligate price-slashing of US-domiciled rivals. But some of the damage is self-inflicted.

VW has been beset by problems in the US and Canadian markets, where it lost almost €1 billion ($829.6m; £572.9m) last year. Not only did it rank 33 out of thirty-five brands ranked for customer satisfaction in a J D Power survey, it also allowed its flagship Passat and Jetta models to get geriatric.

But dealers are satisfied Bernhard is aware of these weaknesses; even more so that he has remedies up his sleeve. "He acknowledged our problems, but he lined up solutions," said Bob Grace, chairman of the VW dealers council.

VW will introduce three new vehicles in North America within the next two to three years and has pegged the suggested retail price of the 2006 Passat, which goes on sale in August at $22,950 - some $1,000 down on the 2005 model. Incentives are likely to further reduce that price. And Bernhard also plans a major increase in advertising expenditure.

Says Bill Gelgota, dealer relations manager at Volkswagen of America: "We have to be competitive. The market is incredibly aggressive right now."

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