Volkswagen's Luxe Affair

Volkswagen shed its “people’s car” image with luxury marques, and now debuts a fleet of high-priced rides from its core brand

Paul A. Eisenstein
From the Print Edition:
Andy Garcia, Mar/April 2004

(continued from page 3)

WHAT PRICE LUXURY?
“The only thing some people think is wrong with [the Phaeton] is the VW badge,” complained Volkswagen AG board member Jens Neumann. Though he insisted “we will build this brand up the way we built up Audi,” he admitted it’s going to be a “long journey” trans-
forming the image of Volkswagen. And a difficult one. The high-line Passat W-8 hit the market with a dull thud, and despite strong reviews, sales of the Touareg SUV have yet to catch fire. During its first year on the European market, the Phaeton fell substantially short of expectations as well. Responding to reports that the project is deep in the red, U.S. marketing chief Frank Maguire countered by saying, “That’s not the purpose. Initially, this is…about positioning the brand.”

Privately, senior VW officials acknowledge they’d have liked more time before launching Phaeton in order to “step up the ladder,” in the words of one, with products aimed a little bit lower in the luxury spectrum. That’s a critical challenge for Piech’s successor, former BMW CEO Bernd Pischetsrieder. Among the products reportedly under development is a sedan aimed at the likes of the Mercedes E-Class, as well as the A6 from VW sister division, Audi. That’s part of the problem. Though VW officials insist they’re aiming at different customers, products like the Phaeton threaten to cut into demand for the automaker’s own Audi brand.

There are other challenges for Volkswagen to overcome. The automaker scores high on the J.D. Power & Associates APEAL study, which focuses on “things gone right.” Today’s VW buyers “place more value on styling, ride and handling, and less on quality” suggests senior analyst Brian Walters, but in the luxury segment, they expect it all. That’s a problem considering Volkswagen lags in the lower third of all brands in Power’s latest Initial Quality Survey, which measures “things gone wrong.” After succeeding Piech last year, one of Pischetsrieder’s first steps was to appoint a quality czar.

It won’t be the first time VW has had to turn things around. The automaker has worked its way through plenty of challenges since Ferdinand Porsche penned the design for the first Beetle prototype. But with the Phaeton, Volkswagen is aiming to transform not only its product line but the image embodied in its very name. v

Paul A. Eisenstein publishes an auto magazine on the Internet at www.TheCarConnection.com.

Also in this issue: