Volkswagen Phaeton Sedan to Make U.S. Comeback

Volkswagen Phaeton Sedan to Make U.S. Comeback

After a complete redesign, Volkswagen AG will be re-launching its Phaeton sedan in the U.S., where it proved to be less than popular just a few years ago.  Sales of the $85,000 sedan were discontinued in 2006. The re-release of the Phaeton is one part of Volkswagen’s plan to triple U.S. market share by 2018.

Then-CEO Bernd Pischestrieder calls Volkswagen’s goal of selling 20,000 Phaetons annually a “pipe dream.” Pischestrieder was responsible for pulling the Phaeton from the U.S. market after its failure to meet sales goals. New CEO Martin Winterkorn, however, fully believes in the potential of the vehicle and decided to hold on to the Phaeton. Last year sales of the vehicle totaled 4,500, falling 27%.

Willi Diez, head of the Institute for Automobile Industry in Germany, said, “The U.S. is a most lucrative market for high-end sedans, and VW has to tackle that potential if it wants to credibly expand its U.S. presence.

Upgrades for the newest Phaeton include new front and rear sections, a redesigned interior and a larger selection of available engines. The Phaeton hit European showroom floors this past June and is expected to be available in China in September. Plans for U.S. availability will coincide with the release of the next generation of the sedan, says Juergen Borrmann, plant director in Dresden, Germany. He did not give an exact timeframe although Diez predicts that the newest generation Phaeton could be out as early as 2013.

Borrmann said, “We have our eyes firmly set on the U.S. market.” The model that will be available in the U.S. will be completely redesigned and retooled, he says.

VW has experienced losses in the U.S. annually for the past seven years, and is headed for an eighth. The goal for the automaker is to triple U.S. market share to 6% by 2018 and raise deliveries (including Audi models) to one million cars. Winterkorn’s larger goal for VW is to beat Toyota Motor Corporation in sales and profits.

Analysts such as Ferdinand Dudenhoeffer of the Center for Automotive Research at the University of Duisburg-Essen, Germany, say the car costs too much to build and cannot compete with the likes of BMW and Mercedes. Winterkorn, who became Volkswagen’s CEO in 2007, argues against this thinking. “Without our flagship Phaeton,” he says, “VW wouldn’t be where we are today in terms of technology and image.”

Borrmann reports that the Dresden plant, which handles final assembly of the Phaeton, is running at full capacity for the first time since beginning operations in 2001. Saturday shifts could be added if demand warrants. He said, “Business is developing very well; we’re headed for a record year. We’re looking at a sustained upward trend, a really strong demand curve that’s also manifest in our orders.”

Phaeton has had a sales surge of 15%, with 70% of that occurring in China, says Borrmann. VW has also seen a slight rise in the German and South Korean markets.

The Dresden plant is a top tourist attraction in Dresden, drawing about 90,000 visitors every year. Borrmann says customers and buyers like to visit the plant to see the factory, collect vehicles and discuss features. Workers there wear white gowns and sometimes white gloves as they hand-assemble the cars on the all-parquet floors. A stunning building consisting of a 40 meter glass tower is the final stop for finished Phaetons before they are delivered. Borrmann said, “We’re making the fascination of auto production visible to the outside world. We’re completely laying open the complexity of how our top-end product is being assembled.”

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