Volkswagen looks to fix flat sales

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Volkswagen of America, unwilling to dive deep into incentives, seems to be treading water.

"We're flat in sales," said Karen Marderosian, marketing director at the automaker. "Maybe [incentives] hurt us in market share, but not in profits." She said VW is advertising 0.9% financing, but only in select markets.

Volkswagen executed an astounding rebirth in the second half of the 1990s. Now, the only VW models with increased sales vs. a year ago for the period January through May 2002 were the niche EuroVan, the Golf GT and the Passat line, which recently added the $38,000-plus W8 eight-cylinder model. Ms. Marderosian said VW expects to sell more than 100,000 Passats this year, including about 5,000 W8s.

The popularity of the pricier Passats has increased VW's total average buyer age, which until recently was the youngest in the industry. The average age of VW buyers rose from 38 in May 2000, to 39 last May and 40 this May, according to J.D. Power & Associates. Industry observers are now concerned the pricier Passat W8 and other upcoming models will cannibalize sales at VW sibling Audi of America.

Moreover Jetta, the brand's bread-and-butter best seller, is in a sales slump. The current model is four years old.

VW's answer is the new Jetta GLI performance sedan. VW launches the manual, 200-horsepower car today on national broadcast and cable TV with an estimated $8 million push from Havas' Arnold Worldwide Partners, Boston. The ad marks the return of the GLI name, which disappeared about a decade ago.

Arnold's sole :30 for the car shows humorous snippets of front-seat passenger behavior with the same driver, who insists they know their "responsibilities" to him so he can concentrate on driving. "For people who take driving a little too seriously," the voice-over says at the end.

high hopes

VW expects to sell roughly 7,500 Jetta GLIs this year, mainly to males.

The marketer spent $370 million in measured media last year, according to Taylor Nelson Sofres' CMR. Ms. Marderosian said her 2002 ad budget is only up slightly from 2001, but declined to give specifics.

Sales of VW's Beetle, which bowed in spring 1998, are also slumping. But the first convertible version of the bug arrives at the end of this year, which Ms. Marderosian predicts will revitalize the model and its sales. The Cabrio convertible sedan will be discontinued in a few months.

VW should have done a convertible version of Beetle sooner, because now the model line is stale, said Maryann Keller, an independent consultant and former president of Priceline.com's auto unit.

VW, meanwhile, is losing owners to competitors because it doesn't have a sport utility or pickup. "The majority of people who leave VW go to an SUV," Ms. Marderosian said.

That will change next year, when the marketer starts selling the Tuareg SUV, named after a nomadic Sahara tribe. VW expects to sell some 45,000 of the SUVs. VW will also enter the luxury segment next year when it launches the Phaeton sedan, available as a 12-cylinder. The Phaeton name has a lot of miles on it, having been used by Duesenberg in the late 1920s, Cadillac and Auburn in the early 1930s and Buick in the late 1930s. VW's Phaeton will be priced at $40,000-plus.

"I don't think VW has lost its luster," said John Bulcroft, president of consultancy Advisory Group. "VW has just run up against the wall of the market now. It's the wildest market I've ever seen in my life."

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