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VW Bullish on North American Phaeton Sales

VW CEO Predicting 3,500 Phaetons Sold in 2004 Despite Slow European Sales

Few new model introductions have come under as much criticism as Volkswagens new luxury flagship. The $65,215 Phaeton has received rave reviews from the automotive press, but there has been concern from investors and industry analysts over the models business case.

Most critics hardly see the need for Europes most popular brand to not only compete with luxury carmakers the likes of BMW, Mercedes-Benz and Lexus, but also to run the risk of parasitically

Critics are questioning the need for Volkswagens new $65,215 luxury flagship, the Phaeton. (Photo: Volkswagen AG)

going head to head with its own Audi brand that features the top-tier A8.

Despite a slow initial response by European luxury car buyers, VW Chief Executive Bernd Pischetsrieder is feeling bullish about the models prospects in North America. In a German television broadcast the VW boss

"What we can say is that next year we expect (U.S.) sales of the long version of the Phaeton of about 3,000 to 3,500." (Photo: Volkswagen AG)

stated, "What we can say is that next year we expect (U.S.) sales of the long version of the Phaeton of about 3,000 to 3,500." Pischetsrieder continued that VW is targeting sales of approximately 15,000 Phaetons globally.

To be fair to Pischetsrieder the Phaeton wasnt his brainchild, but the offspring of his predecessor, Ferdinand Piech. Piech was responsible for turning Volkswagen AG - then hemorrhaging at $1.1 billion a year - around to profitability

VW Chief Executive Bernd Pischetsrieder is under pressure to perform, and is looking to the Phaeton to boost overall profits. (Photo: Volkswagen AG)

after taking over in 1993. Despite Peichs early success, the company continues to suffer poorer than average reliability issues resulting in recalls and expensive warranty costs, all contributing to its current financial woes. Also, a recent onslaught of new models has reduced VWs short term profitability.

Recently VW AG announced it would experience a drop of a "couple of hundred million euros" over 2003, a rough figure that takes into account the decreased value of fixed assets and development costs. If accurate this would reduce operating profit to about half of the 4.76 billion euros it made in 2002.

Now

In the end, the new Touareg will probably add more to the coffers than the Phaeton, but only time will tell. (Photo: Volkswagen AG)

VW needs to perform, delivering higher profits to its shareholders and greater reliability to its products. Pischetsrieder is no doubt under pressure, and now looking to the recently launched Phaeton to boost overall profitability.

More likely the coffers will be filled by products such as the new Touareg sport utility, as well as continued growth from its many other mainstream brands that include Audi, Seat and Skoda. VW AGs premium divisions, Bentley, Bugatti and Lamborghini will do there part, but relatively low sales volumes will be about as effective to the bottom line as replacing a divot on mine field.

With that in mind it may just be that an increase in profits will only come from VWs core product line, when the next-generation Golf, Jetta and Passat models become available.

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