VW wants to be the people's car again in the U.S.
— -- A car company hoping for mainstream success in the U.S. has quality problems and earns a sales-damaging reputation for unreliable vehicles.
Fighting to keep a handhold in America, the automaker does a deep dive into American tastes and rolls out some larger, better-equipped, but also value-priced vehicles that sell like crazy.
That sounds like the saga of South Korean automaker Hyundai, which evolved from invisible in the 1980s to seemingly unstoppable now, after improving the quality and jazzing up its designs.
But it also describes Volkswagen.
"VW is one of the most promising brands for the rest of this year and next year," says Jesse Toprak, in charge of forecasting market trends for auto researcher TrueCar.com.
The purveyor of interesting, German-flavored vehicles that are getting more American all the time is riding a streak of hefty monthly sales increases.
In the first nine months of this year, VW brand sales are up about 22%, more than twice the overall market rise of 10%, according to tally master Autodata.
And VW just launched two high-profile 2012 redesigns — Passat and Beetle — that should keep the pot boiling.
VW also swears its quality and reliability are improving quickly, though that's not fully reflected yet in third-party report cards from Consumer Reports magazine and consultant J.D. Power and Associates. Warranty costs are dropping 10% a year, VW says, and other arm's-length studies show that owners love their VWs, even if something might still go wrong.
VW also has the mainstream diesel market to itself. Fuel-stingy diesels are 22% of its U.S. sales. The only other way to get a fuel-efficient diesel in the U.S. is to pay Audi/BMW/Mercedes-Benz prices, or buy a truck.
Most important, the VW brand will make an operating profit in the U.S. this year for the first time since 2003, according to VW U.S. CEO Jonathan Browning.
And it will report a full, all-in profit in 2013, he says, even counting the U.S. brand's share of costs for the new $1 billion Chattanooga, Tenn., factory that now makes Passats and will make other vehicles to be identified in the future.
Do the monthly sales jumps and the developments make VW the new Hyundai?
"They could be. They have the potential to gain market share, pull in first-time buyers sitting around in the netherworld of pent-up demand," says Rebecca Lindland, veteran auto-industry analyst at consultant IHS Automotive.
The obvious difference between the two automakers' market trajectory is that Hyundai earned its way up the ladder of success in the U.S. over just more than two decades. VW, in this market more than half a century, had it, lost it and wants it back.
Can VW success last?
And it seems to be succeeding — but for how long?
"You take volume from everybody. That's how you grow," Lindland says. "I'm not sure Volkswagen is situated to do that."
For one thing, other automakers won't make the mistake they made with Hyundai: paying too little attention to a small blip on the radar that quickly became a big threat to their sales.
For another, VW might run out of ammo.
By the end of this year, dealers will be well-stocked with the redone Passat that hit the market a few weeks ago and is selling about three times as fast as the old model in recent years.
The full remake of the iconic Beetle, also now on sale, seems quick out of the gate, though it's too soon to judge.
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