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New Volkswagen CEO Steering Iconic Brand Back to Being Value Leader

Bernhard Says VW North America is "A Company in Crisis"

Finally theres someone with good old fashioned common sense running Volkswagen. Not that Herr Dr. Bernd Pischetsrieder, chairman of the board of management of Volkswagen AG doesnt have his act together, he most obviously does as he managed to lure Wolfgang Bernhard away from DaimlerChrysler and placed him in the top position over the iconic VW brand, but ex-Volkswagen Chairman Ferdinand Piëch truly didnt understand VWs core value proposition at all.

Rather than allow Volkswagen to continue its leadership as the premium make among entry-level brands, a position that it has earned by always offering slightly sportier, more solid feeling

Finally theres someone with good old fashioned common sense running Volkswagen, new CEO Wolfgang Bernhard. (Photo: Volkswagen of America)

cars with better interior quality than its Asian and American rivals, Piëch had a "vision" of Volkswagen as a premium brand, right up there with BMW, Mercedes-Benz and, ironically, Audi. The result of his vision is the Phaeton luxury sedan, one of the most impressive vehicles in the full-size premium four-door market segment, unfortunately saddled with a badge that most consumers associate

VW has long been considered the premium make among entry-level brands, a position that it has earned by always offering slightly sportier, more solid feeling cars with better interior quality than its Asian and American rivals. (Photo: Volkswagen of America)

with thrift and economy.

To be fair to Piëch, VW AGs broad European nameplate portfolio, which included Spains SEAT and the Czech Republics Skoda brands situated below Volkswagen, was the main reason VW was chosen to move up-market. But the move has proven nearly fatal in North America, with Volkswagen having run up losses of approximately $1.24 billion in North America, mostly in the U.S.

Volkswagen recently warned analysts that it didnt expect to achieve any profits in North America until 2007, a problem that new models like the upcoming Eos convertible, introduced at the Frankfurt auto show earlier this week, could go a long way to eradicating. (Photo: Volkswagen of America)

- the brand does slightly better in Canada due to that countrys penchant for smaller cars and a stronger following of diesel buyers.
Only last month, Volkswagen warned analysts that it didnt expect to achieve any profits in North America until 2007, due to low revenues and extremely strong competition on new cars prices from General Motors, Ford, and Chrysler Group.

"Its a company in crisis," commented Bernhard. "People need to understand that. They have to change."

Chryslers Pacifica offered elegant styling, excellent perceived quality, plus more luxury and convenience features for the dollar than any rivals, but when it debuted its MSRP was still too high for its brand image, and sales suffered before a significant price drop. (Photo: Trevor Hofmann, American Auto Press)

What the automaker failed to mention was that Volkswagen was also in crisis because it continues to lose market share to Japanese competition as well as domestic rivals, plus its confusing marketing message to consumers, targeting economical compact buyers on the one hand and wealthy super-sedan customers on the other, have caused some potential owners to believe that Volkswagen cars are too expensive, or for that matter not prestigious enough.

Some other automakers have tried to move up-market too quickly, with equal results. Chrysler, for instance, brought its new Pacifica

Volkswagen, under Pischetsrieder and Bernhards leadership, has woken up to the realization that it shouldnt be playing in the premier league, a sector that its Phaeton luxury sedan struggles to compete in. (Photo: Shawn Pisio, American Auto Press)

crossover SUV to market in one fully-loaded trim level for a price that was much more than most consumers were prepared to pay for a product from the "blue ribbon" brand. And its not that the vehicle itself didnt deserve to fetch its original $35K price point, as it offered elegant styling, excellent perceived quality, more luxury and convenience features for the dollar than any rivals at the time, and the list goes on, its just that the brand, which was selling Neons up until the previous year, wasnt prestigious enough - the 300C, and to some extent the Pacifica over time, have helped to improve Chryslers image, but dont expect its brand managers to once again attempt to take it where it doesnt belong anytime soon.

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