Volkswagen to yank slow-selling Phaeton from U.S. market next summer
DIANA T. KURYLKO | Automotive News
WIM OUDE WEERNINK | Automotive News Europe
Posted Date: 11/14/05
Volkswagen AG is admitting defeat with the Phaeton. VW plans to pull the slow-selling luxury car from the U.S. market next summer.

The Phaeton is losing money in the United States. "It is not a viable business case anymore," says Hans-Gerd Bode, a VW spokesman at the company's global headquarters in Wolfsburg, Germany.
The decision to pull the plug was made by Wolfgang Bernhard, head of the VW brand worldwide, and Adrian Hallmark, the new executive vice president of Volkswagen of America Inc.

The executives decided Volkswagen will focus on being a volume player in the U.S. market instead of trying to move up-market, Bode says.

"Bernhard and Hallmark said, 'We are a volume producer, and let's go in this direction, beginning with the U.S. market, where we are losing a lot of money,' " Bode says.

Slumping sales

The Phaeton's U.S. sales tumbled to 686 in the first 10 months of 2005 from 1,433 in the year-ago period. That's a 52.1 percent drop.

VW prices the Phaeton at $68,655 for a V-8 model, including a $1,300 gas-guzzler charge. The 12-cylinder version starts at $100,255, including a $3,000 gas guzzler charge.

By contrast, the most expensive four-door VW Passat sedan starts at $32,515 for a 3.6-liter VR6 model.

VW plans to announce the Phaeton decision to dealers today, Nov. 14. Wolfsburg expects Phaeton sales to end in the U.S. market next July or August.

The company will not send the 2007 Phaeton here.

VW will continue to provide customer support to Phaeton owners, Bode says.

VW's U.S. market will focus on core vehicles, including the Passat, Jetta, Golf and Touareg, Bode says, along with new models such as the Eos convertible that is due early next year.

The company's U.S. dealers will get a car above the Passat as part of a product offensive that Bernhard has promised for 2008 and beyond.

Since VW launched the Phaeton in the U.S. market in 2003, the car has not approached its initial sales target of 5,000 a year. This year, the Phaeton does not appear to be on track to hit its lowered U.S. sales target of 1,000.

VWoA offered $10,000 in dealer cash last year on 2004 models.

Bode says it was probably a mistake for VW to launch the Touareg and the Phaeton together. Marketing wasn't sufficient to position both vehicles strategically, he says.

VWoA's marketing also has been inconsistent, Bode says: "In the last year, we didn't have a good marketing effort in the U.S. Today we do this, and tomorrow we do that."

Bode says VWoA's continued losses also affected the decision to yank the Phaeton. VW expected to turn around its fortunes in the United States this year with redesigned versions of the Jetta and Passat and a freshened New Beetle.

This month, though, Wolfsburg announced this year's losses at VWoA are expected to top last year's loss of $1.07 billion.

Chris Curran, a Volkswagen dealer in Stratford, Conn., says "it's no surprise" VW is dropping the Phaeton.

"As the volumes got smaller," says Curran, "they decided they didn't have enough funds to support stronger incentive programs."

Curran says the Phaeton represented too big a jump forfor traditional VW buyers to make. At the same time, he says, luxury buyers did not gravitate to the car.

Says Curran: "People in that high-price range are buying prestige and image, and want the logo to represent that."

Probably not, if they make no money in the US, why sell in Canada. We represent only a small percentage of NA car sales.

To this day I don't understand why they sold it under the VW nameplate. That would be like Daimler-Chrysler building a super-luxurious, $80,000 luxury sedan and selling it under the Dodge nameplate. Nobody buying a car that expensive wants to share a nameplate with Jettas and Golfs. I think that alone doomed the Phaeton.

I think that alone doomed the Phaeton.

I feel sorry for VW being trapped though...they have a simultaneous reputation of being economical and, more recently, of being luxurious, chic, and well thought-out. I can't think of any other car company that has to balance such differing consumer expectations at the same time. In other words, what makes a VW a VW makes it not a VW. No matter what they do they're going to piss somebody off.

ha, but VW is losing money, and at a prodigious rate.

And there are some people in the press who are calling the Passat too expensive, the Jetta overpriced, the Golf not basic/cheap enough, etc...it's not the uproar that happened with the Phaeton, but it's there, and it's because there are consumers out there who are expecting one thing from VW and getting another.

It's a shame, it was an excellent car, and I love its completely understated style...it was so much classier than a BMW or Mercedes or even a Jag in my book. I mean, yeah, VW shouldn't've built it because the rest of their lineup stagnated while they developed it, but the end result was fantastic.

Now that you mention it, I remember Motor Trend making a one-sentence complaint about the price of the new Passat. But they were comparing it to the Accord and Camry, instead of comparing it to a Volvo S60/V70 or a Saab 9-5. The Passat is certainly fairly priced compared to the Saab and Volvo--and fairly equipped and performing, as well. I wonder why the press continues to compare the Passat to the less-equivalent Japanese family sedans.

i've only seen a handful. and usually bland cars with big price tags sell very well here

VW doesn't want to compete with Saab and Volvo- They want to compete with Chevy, Honda, Nissan and Toyota.

VW doesn't want to compete with Saab and Volvo- They want to compete with Chevy, Honda, Nissan and Toyota.

Given the force behind the Touareg and the Phaeton from the management of VW, I'd say you're wrong.

Only after the failure of the Phaeton have they learned that they have to be downmarket. The Passat is VW's way of pushing the envelope of what people will accept...the 3.6 model really is more into Acura/Lexus/Infiniti/BMW/Jaguar etc. etc. territory.

They'll try again with the C1...it will be cheaper than the Phaeton; a closer relative to the Passat. I suspect that it's going to be a hard sell with a sticker in the $40k+ range, even if it does turn out to be a great car...which, as I've said about the Phaeton, is a damn shame.

When people think German speed, they think BMW.

Umm.... Porsche?

Too expensive for me to count. Well, I guess with the Boxster, maybe not...

Anyway when I say people I say the majority, and the majority aren't going to be buying or thinking about purchasing Porsches.

But "the majority" don't drive BMWs either. Certainly not BMW M cars. They drive like Chevys and Fords and Toyotas and stuff.

So what car companies ARE profitable nowadays? Just Honda, Toyota, and BMW?

Porsche

Porsche

But isn't Porsche just a division of VAG?

GRRRR for the last fucking time NO! Porsche is independent; in fact, they just bought 20% of VW. Why does everybody think Porsche is owned by VW!?!?

BMW is the last truly independant auto manufacturer in the world. Everybody else shares a model(s) with another company.

GRRRR for the last fucking time NO! Porsche is independent; in fact, they just bought 20% of VW. Why does everybody think Porsche is owned by VW!?!?

No BMW car or truck is shared with another company, BTW that Rolls and Mini are owned by BMW is not important because neither has a bearing on what BMW's are made and there is no parts sharing beyond third party suppliers.

VW doesn't want to compete with Saab and Volvo- They want to compete with Chevy, Honda, Nissan and Toyota.

No BMW car or truck is shared with another company, BTW that Rolls and Mini are owned by BMW is not important because neither has a bearing on what BMW's are made and there is no parts sharing beyond third party suppliers.

lol FWD mini and a RWD 3 series sharing the same platform... man you make me laff some days leif.

Doesn't have bearing? So it's sheer coincidence that BMW doesn't sell a car in the United States that competes directly with the Mini Cooper?

The 1 series is coming.