Word: volkswagen
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Ordinarily, Volkswagen might be able to argue that Jones received a rare lemon. But in the latest survey of three-year depend-ability by J.D. Power & Associates, American consumers ranked VW-brand cars 34th, ahead of only Suzuki, Daewoo, Land Rover and Kia. Consumer Reports, which recommended three VW models in the late 1990s, keeps only the pricey Passat on its list of recommended cars. That's quite a tumble for the Volkswagen Group, Europe's largest automaker, which turns out 5 million units a year under brands including Audi, Bugatti, Seat and Skoda...
...sales fell 14.6% over that same period, to 221,177, and operating profits in North America shrank to $68 million in the first six months of the year, down from $944 million during the same period in 2002. While North American sales accounted for just 20% of Volkswagen's $101 billion in global revenues in 2002, they delivered 27% of its $5.4 billion in operating profits. And VW clearly aims higher: around a third of its $1.6 billion global ad budget is spent...
...charge of revving up Volkswagen is CEO Bernd Pischetsrieder, who took over from the domineering Ferdinand Piech in April 2002. A personable, goateed man who ran BMW from 1993 to 1999, Pischetsrieder, 55, is pursuing a risky sales strategy inherited from Piech: pushing his flagship brand into the U.S. luxury arena, where vehicle profit margins are higher than in the mid-priced segment in which VW typically competes. At the same time, he is wringing costs out of manufacturing through design changes and by getting relief from VW's expensive German work force. The firm recently announced that net profit...
Pischetsrieder's first task. Next he has to ensure that VW's move into luxury doesn't come at the expense of sales in its higher-volume, mid-priced segments. "We know the premium segment is different from the mass market, and we need to make certain that Volkswagen lives up to its new image," he said in September...
Will such moves be enough to lure back customers like Jetta owner Ann Jones? A few weeks ago, she became fed up with her car and traded it in for a new Honda Accord. It's a testament to VW that she did so grudgingly. "I will miss the Volkswagen style, and I was saddened to leave my Jetta," she says. But her Accord provides her with something her Jetta never did: "I have more peace of mind." --With reporting by Joseph R. Szczesny/Detroit and Steve Zwick/Frankfurt