To Climb In U.S., Volkswagen Gets Less German
Last year was a very good year for the German automaker Volkswagen, but 2012 could be even better.
Sales for Volkswagen Group's brands — including Audi, Bentley and Lamborghini — increased by 20 percent in the U.S. last year. For the Volkswagen brand itself, sales rose 26.3 percent. And if things continue to go Volkswagen's way, it could become the No. 1 carmaker in the world.
But the brand wasn't always so popular in the U.S. I love to look at car commercials, not because they're good (which they're usually not), but because they offer a glimpse into the corporate mind of an automaker. In a Volkswagen commercial you might remember from 1990, for example, the announcer tried to import a very German-sounding word into the U.S. driver's vocabulary.
"There is a word for this driving experience: Fahrvergnugen," a voice-over said. "Fahrvergnugen: It's what makes a car a Volkswagen."
Rebecca Lindland, director of research with IHS Automotive, says that for a very long time, Volkswagen took a very German approach to making American cars.
"They always kind of [looked] askance at just the sheer sizes of our vehicles, let alone our demand for cup holders," she says.
Lindland says Volkswagen wasn't providing American consumers with the kind of cars that the vast majority of Americans wanted or, for that matter, needed.
"The way that we drive is so different here," Lindland says. "We cover long distances, we have really bad commutes, we have larger families, and we are bigger people — whether we want to be or not, we just are."
So Volkswagen, which is a dominant player in Europe and Asia, is not even in the top five in the U.S. market. The company began to realize that it wasn't going to grow here without changes.
"[Our market] is different," Lindland says. "You cannot put the same car in Germany and in the States, and expect the same level of demand."
Volkswagen has refocused its attention on the American market. The automaker introduced a new version of its iconic car, the Beetle, and the company also introduced bigger, less quirky cars to the U.S.
The company has invested billions in the market here. A Super Bowl commercial featuring a kid pretending to be Darth Vader helped catapult sales of the Passat, its passenger sedan. And in the U.S., Volkswagen car sales have risen more than 20 percent.
The company has made it clear that it wants to grow sales not just in the U.S., it wants to be the No. 1 car company in the world.
"We're not fixated on the number," says Jonathan Browning, president and CEO of Volkswagen Group of America. "We're focused on putting the infrastructure [and] the foundations in place that will allow this growth to be sustained over time. It's not just about saying we've won the battle [for] one month or one quarter; it's building this in a sustainable way over time."
Part of that infrastructure means, for instance, a plant in Chattanooga, Tenn. Workers at VW's plant are among the lowest paid in the American auto industry. It's expected that VW in the U.S. will be targeted for unionization by the United Auto Workers.
"At the end of the day, it will be our employees that make any specific decision in terms of unionization, but our focus is very much in terms of getting the plant up and running," Browning says. "Right now, all the signs are good in terms of success in the plant."
Volkswagen is in a race with Toyota for the No. 2 spot in the world. To pass General Motors to get to No. 1, VW needs to move up a few notches in the U.S.