Word: volkswagener
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...they kidding? Not a bit. Volkswagen has spent nearly $900 million developing the new car, which is called the Phaeton and will be officially unveiled at the Geneva motor show next month. The brainchild of VW CEO Ferdinand Piëch, the Phaeton represents the company's latest attempt to move the brand up-market away from commodity car-making and into the profit zone long dominated by Mercedes and BMW. But it's a huge gamble for a company whose very name means People's Car. "The question is, will a customer want to pay that amount of money...
...optional 12-cylinder engine and a special pneumatic suspension system to guarantee a smooth ride. The price tag is breathtaking too: between $46,000 and $92,000, depending on extras. But this car is not the latest Mercedes or even a top-of-the-line BMW. It's a Volkswagen...
...terms of autos sold. He has expanded its car business by successfully integrating new brands such as SEAT and Skoda. And Piëch has added some boutique carmakers like Lamborghini and Bugatti to give the company, which also includes Audi, some additional cachet. Under Piëch, Volkswagen commands 51% of the car market in China and 25% of sales in Brazil. Perhaps most important is what Piëch hasn't done: made expensive mistakes, as BMW did in buying British car-maker Rover and as Mercedes committed by acquiring U.S. giant Chrysler...
...real problem with Volkswagen as an investment is that its largest shareholder is the state of Lower Saxony, which holds 18.2% of the shares and is more interested in preserving jobs than enhancing shareholder return. There is also a law on VW's books preventing any other investor from holding more than 20% of the company, an effective bar to a takeover bid. For these reasons VW's share price languishes at 1997 levels. "The feeling is that the management in place has tended to give low priorities to investors, having several other constituencies that come higher up the attention...
...effort to address some of these concerns, the company decided to reorganize into two groups. SEAT and Lamborghini will be part of the new, sporty Audi group. The more traditional Skoda, Bentley and Bugatti will fall under the Volkswagen brand. "This will support corporate transparency and our customers' and shareholders' interest in the company," VW said when the restructuring was announced last year. In fact, for a high-volume manufacturer, VW had a pretty good year in 2001. Return on sales was a robust 5%, about the same as Peugeot, but behind BMW's 7% and Porsche's double digits...