VW Losses in North America

The Tuesday, 16 November 2005, Washington Post carried a WSJ article about the withdrawal of the VW Phaeton from the US market.

But what really caught my attention was the statement that VW has lost $960 million so far this year in the North American market.

That seems incredible to me, but it appears to be correct. How much is that per vehicle? If VW is selling 15,000 vehicles per month, that would be: $960,000,000/(15,000*10) = $6,400 per vehicle !! Aargh!!

Even at $5,000 loss per vehicle ........

That's many times more than GM is losing per vehicle.

Reply to
Robert J Carpenter
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I'd be curious to know what the definition of loss is, what's included in that calculation, and what the mechanism is by which the money is lost.

That $6400 per vehicle, since it's a loss, is below their cost to produce, not just below their suggested selling price. Their North American plant is in Mexico, labor is cheap there -- they can't be suffering the same kind of union-benefit losses that GM is. Are there that many cars that simply go unsold? Do they just junk the ones that are unsold, with no cost recovery at all? Are they spending that much on recall and warranty repairs? Mystery to me.

Reply to
Brian Running

Neither GM nor VW has much of a clue as to what the public really wants or needs. That's why they are both in such serious financial trouble. If they are wise, they will start paying attention to what Honda, Toyota, and other future-minded companies are doing.

Reply to
Papa

Seems to me it's not a matter of being out of touch with what the public wants -- at least not product offerings. After all, some of Honda's newest products are out-and-out imitations of GM products (am I the only one that thinks the Ridgeline is an Avalanche with Aztek styling?), and Toyota has heavily skewed their product line towards SUVs, minivans and trucks. I believe it's a quality problem. GM has never made top-quality products, and they refuse even to try. VW seems oddly indifferent to quality problems and warranty claims. I've had no unusual problems with my VeeDubs over the years, but the horror stories are out there, and well-known by the public -- meanwhile, VW does nothing to improve its public image regarding those QC issues.

Reply to
Brian Running

Maybe it is what the NA customer really wants? :)

There should be no financial losses then, as the sucessfuly denied claim costs you no money at all :) You will just lose a customer, but as VW produces (almost?) no cars in the USA, it can't make you lose money, as your factory eats money elsewhere.

And the VWoA expenses alone can't be so high, even with warranty claim expenses.

Well, pick your favorite model and look at how much does it cost in NA and how much in (for example) Europe. And don't forget to take into account all the nice features, such as climate control, power windows, alloys etc which usually cost a lot of additional money here in Europe. I believe you know how to find the American prices, and the european ones could be easily found under

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with help of the car configurator.

I think this is the real reason, why VW loses so much money. As the dollar went down, the prices of imported cars did not rocketed up.

Reply to
draugaz

I thought my point was obvious, apparently not. Yes, that is what the North American customer wants, that is what GM produces, and Honda and Toyota have followed GM's lead in doing so. Therefore, it's not accurate to portray Honda and Toyota as meeting consumer desires but not GM. See?

Reply to
Brian Running

What kills me is that NO ONE sells a small size, 4 door, 4 wheel drive, diesel pickup. Good power, good gas mileage. If they could do that at a good price I bet it would sell.

Reply to
Numan

Reply to
none2u

Isn't it to do with them having to sell cars in US or Canadian dollars, but they conduct business in Euro's?... Which did quite a bit better then the US dollar over the past couple years in trading... So it's harder for them to make money.

It happened a long time ago too, the German Mark appreciated like crazy and VW could hardly make money here and had to jack up prices...

Reply to
Rob Guenther

Reply to
Rob Guenther

VWs problems are.. They have small market share,and they never want any more.. The US market is just a sideshow to VW.., The Africa of WW2, The Afghanastan of the Iraq war.. and they are, more susceptable to market changes, by their own doing.. Theyre Euro style interiors are not very appealing to US customers.. They have a very poor US repeat customer base.. Because their drivetrains are very good, but everything else breaks, So their customers drive around a long time .. with items broken in their cars they cant afford or dont want to fix. Things that should of never broke at all . Things that drive them nuts. Coils should never go bad, recall. Windows shouldnt fall in the doors, recall. Tansmissions shouldnt slam customers in the seat belts when letting off the gas on the freeway, software.. And they customers shouldn't have to argue with dealers for weeks , so they can get it fixed..And it irks people for a long time, or until their loan is up. Then they unload it on the used market for another better vehicle.. and never ,ever, ever, buy one ever again.......VW offeres a 4 door diesel hatch..Hatchbacks are almost totally hated in America. VWs manufacturing cost are high and quality in inconsistant.. VW loves to hide engineering or Quality issues from its US customers.. unil they,re sued and forced to recall. Theyre cars are sold on clever marketing , not unbiased comparitive ratings involving their competitors comparitively priced vehicles. Because they can't compete with unbiased comparisons.. on purchase price, reliability, dealer service, buyer satisfaction, or resale value, Hence the stupid kids jumping around in their appartment blasting the stereo commercials.. , or remember Farfegnugen, Yuppie ads sell cars, but only do it once per person, per lifetime..Because .... Their cars don't deliver. They are overpriced, A $22,000 US diesel golf is worse in every way except milage to every auto manufactured in the $US 18,000 - 20,000 vehicle market . Americans love to pay a premium for a superior product, or pay rock bottom for crap..and are unforgiving for the rest of their lives, of a premium price paid for a mediocre product.. Dealer service is inconsistant and bad. Parts are overpriced and not available. A new diesel fuel pump is over $3200 US. So VW has to ...... To Cater to intelligent educated yuppies who can afford to buy one. and hav'nt owned one yet... VW s are high maintenance, quirky, not reliable, and ergonomicly incorrect to US citizens. The longer you own one, the more you hate them... So when the intelligent ,educated yuppie figures this out , by owning one... They never ever buy one ever, ever, again..... And VW is forced to use clever marketing on the next generation.. of upcoming yuppies.. They limit themselves, because it cost a lot more for them to deliver a superior product worthy of lifetime customer loyalty.. And everyone at VW has to cooperate for that, ...Not VWs forte.. The only real VW loyal customers are those who want the 80s diesel vehicles A1, A2,and a little A3. And a smalll minority of VW vehicle owners who got lucky, or pamper their vehicles so they wont break.... I 've owned numerous VWs , and drive other peoples, every chance I get.. I tried very hard to justify buying a Diesel hatch golf for $US 22,000. when every manufacturer offered a superior product for

19,000 or less..VW wouldn,t finance and didn't even give me a T shirt.. More stupid marketing. So I bought a Toyota , in every respect except milage a better vehicle. And $6000 cheaper too boot. I drive my 86 diesel golf in the winter,fix it myself, 40mpg..........200,000 mi, great drivetrain, everything else is broke or going to be, and load its hatch like a truck.. on the Salty eat your car up roads. ...............My 81 rabbit,50 mpg, fix it myself, no AC on long trips. and my Toyota summer fun, will never break, drive it until your hair turns grey vehicle, right on by the wouldnt take a broken skateboard to the rip you off, its your fault, we just sold it to you, leave us alone, dealership...........With their parking lot full of customers VWs with the broken windows down in the door while its snowing , and the ignition coils burned out , VWs sitting on a tow truck waiting for poor service dealership......... while their VW contractor works overtime trying to manufacture coils they didnt do right in the first place............. WHOA.......say that in one sentence........ "Rob Guenther" wrote in message news:ijRef.46880$ snipped-for-privacy@read2.cgocable.net...
Reply to
none2u

No, there are no "general" european taxes, except the usual sales tax which is called VAT and is something like 15-18% depending on country (for example, 16% in germany). I think most of the NA states have something similar too. Maybe some 6% instead of 16%, but the difference is not dramatic.

There are _some_ countries with absolutely horrendous registration taxes, for example Denmark (180%) or Findland (100%). So, in Denmark you buy 3 cars and get one :) But it is more an exception than a rule.

I would say, that VW sells cars in the USA some 30-40% cheaper than in europe, even before taxes. And I don't believe, that they have so much markup in europe.

So, in end effect, the more you sell, the more you loose. And you can't just stop selling, or your delaer network will collapse and you are out of the market forewer. So, you need to sell as little as possible while making some marketing noise, carry your production over atlantic (as it is already happened with new Beetle, Jetta, Fox) and wait for the better. It can't be good if you loose some 10-20000$ on every tuareg or phaeton sold in the USA.

There are some companies, which buy new european built VW's in USA (Touareg for example), ship them to europe, make all the necessary changes (blinkers, instrument clusters etc), pay all the taxes and sell them some $10k cheaper than VW itself while still making a profit. Inspite of shipping 2 times over atlantic, profit for american dealer, part costs, labour costs, own profit and warranty expenses (which such a dealer needs to provide on it's own).

So, you can imagine yourself.

Reply to
draugaz

All you needed to say to get your point across is that VWs are unreliable, the VW dealers are uncooperative, VWs are too expensive and are expensive to repair, the American market is trivial to VW (I doubt that), Americans buy them just once, and Americans don't like them.

Reply to
Papa

Personally I think that paying attention to Honda and Toyota is a recipe for disaster. VW needs to come up with their own image, not try to beat the big players at their own game. What I would do if I had any say in how VW was run:

  1. Stop being such asshats about warranty service and recalls. VW's customer service notoriously sucks, and it doesn't help when people with exploding heater cores, for example, are told that they're ass out even though it's well known that VW has a problem. The coil pack fiasco where the good coils had a 6 week lead time even though there was no inventory, and the window regulator failures where bad parts were left in cars even after the first warranty repair, were unacceptable. My '02 GTI took three trips to the dealer for two windows, wouldn't one have sufficed?
  2. Stop trying to move "upmarket." VW's most loyal customer base is people who want small, fun to drive cars which are well engineered and last a long time, and are willing to pay a premium price to obtain same. BMW has completely abandoned that market and gone to Japanese gadget hell, and nobody has stepped in to fill the void left by BMW and VW, although Hyundai looks like it might take over if nobody does anything about it. Meanwhile VW is trying to sell Camry-sized Jettas and doesn't really have a small, simple car offering anymore (this is where I'd start waxing nostalgic about my old Rabbit GTI or Scirocco if you let me.)
  3. due to 1. above, a move upmarket will never work anyway, as upmarket buyers are much less likely to put up with piss poor dealer service.
  4. Oh yeah, educate your dealer service departments as to what your vehicles really require. It's bad enough that it appears that the practice of using non-VW approved oil in dealership service departments is widespread, but I actually had to tell my local dealer about the mis-phased speaker issue with the Monsoon stereo in my '02, because I read about it online before that info trickled down to the dealerships. Just two examples of where one hand doesn't talk to the other, and the customer loses.

basically, what I'm saying is that VW has to offer apparent value for the price, and buyers are obviously not seeing that... it's a shame, as VW has some true gems to offer, such as the 1.8T and TDI engines.

nate

Reply to
N8N

I cannot agree. What Honda, Toyota, Nissan, Hyundai, and probably car manufacturers in China That I haven't heard about (yet) are doing is to offer the type of cars NOW that GM and VW consider decades away. They are asleep at the switch, so to speak. So it's not image-making, it's MODERN car manufacturing. They (GM and VW) can choose to join the 21st century, or fade away.

Reply to
Papa

Ok.

That is a contradiction. It would mean, VW will need to beat Hyundai, Kia and "soon to be there" China in their own game. VW is still european engineering, so, it is expensive. they try to do it affordable, and get the quality problems. You either go upmarket and offer something the koreans and china can't, or you will be beaten. Look at electronics. It's the same game.

But it would still be "overpriced". Because koreans and chinese can offer their cars for even less. Even then they were not cheap. You just had no cheap korean/chinese cars compare.

If Europe is some indication, then here we have some examples. There is a Brasilian VW Fox, which is 1.5 times cheaper than VW Polo and 2-2.5 times cheaper VW Golf. Do we see a lot of them in the streets? No. Because nobody wants a simple VW which is still more expensive than a comparable Hyundai or Kia.

Yes. This is the problem they need to work on.

And then you suddenly leave the "cheap" segment. Because the car with

1.8T must offer adequate safety, suspension and so on, and you land where current Jetta is.
Reply to
draugaz

Ok, then there is a simple business quiz for you :)

Imagine you are the manager at VWoA.

You know, that toyota loses some 2000$ on every Prius sold. You yourself lose some 5000$ on every VW you sell.

So, you pick up the phone, dial the number of the german HQ and say: "hi guys, how are you? I would like some hybrids here, as they are currently mega-in. We need to beat the toyota. Could you send us some? There is an opportunity to lose some 7000$ instead of 5000$ and we can't afford to miss it. And we will sell a lot of them, so prepare to sum the losses up." :)

Try guessing the answer :)

Reply to
draugaz

All of that post rings true -- and ought to be read by every VW executive and dealer. Well done!

Reply to
Brian Running

I do, if it looks cooler and drives better. That's why I bought a Fox in 1990 instead of any other $9500 car of the time.

Offer a Polo or Pointer variant for less than $15000 US and watch them fly off the lot, especially if they get at least 30mpg.

VW has Audi for the high end. The VW line should top out at the Passat.

...Sean.

Reply to
CheetoDust

Reply to
none2u

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