VW considers halting Golf sales in US
By Richard Milne in Vienna
Published: June 16 2008 17:17 | Last updated: June 16 2008 17:17
In an attempt to lift its best-selling model closer to profitability targets, Volkswagen, Europe’s largest carmaker, is seriously considering pulling its flagship Golf hatchback from sale in the US due to the weak dollar.
The German company could also suspend sales of the new Golf – due to appear in its sixth generation this autumn – in Brazil and Australia in spite of cost-cutting that has trimmed about €1,000 ($1,548) off each car.
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But the US market has proved a disaster for VW recently, with losses in the billions of euros as a mixture of the weak dollar and poor products has hit hard.
VW is planning to build a new factory in the US to open in 2010 or 2011, with a final decision probably due next month. This plant is intended to produce a new mid-sized saloon similar to the Passat to sit alongside VW’s smaller Jetta saloon, which is manufactured at its Mexican factory.
VW managers said it was possible the Golf – known as the Rabbit in the US – could be produced at the new US factory. But until that point, sales were likely to be halted in the US. VW intends to continue selling its high-end version of the Golf, known as the GTI in the US, to protect its image.
VW said it aimed to make a return on sales of 8 per cent over the lifecycle of the Golf – expected to be about six to seven years – but only about 5 per cent during its introduction. It declined further comment.
VW managers said Martin Winterkorn, the chief executive, overhauled the Golf with many new touches having been unsatisfied with his predecessor’s work. “That made the car in many areas more expensive, but he thinks he can sell it for more money,” a manager said.
The current generation of the Golf has proved a financial problem for VW from the outset, when the carmaker had to resort to incentives just to sell it. The model has only recently started to be profitable.
VW is struggling with many of its models in the US but continues to sell some to maintain its image there, such as the new Tiguan small sports utility vehicle and others, such as its bigger Touareg 4x4, because the margins are so good. However, its goal of overtaking Toyota is all but impossible without more success in the US.
VW aims to triple its US sales to 1m by 2018, including sales of its Audi luxury brand. It is considering introducing models such as pick-ups and mini-vans, but some experts worry these could come at the wrong time given high oil prices.
Mr Winterkorn told the Financial Times this year: “Maybe we will even have to build the Polo [one of its smallest cars] in the US or smaller
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