Despite cost-cutting measures meant to save the automaker €5 billion annually by 2017, Volkswagen is moving ahead with a new Phaeton by 2018 at the latest.
Reuters reports the revamp of the €76,000 ($86,000 USD) executive car would cost up to €650 million ($733 million) according to Evercore ISI analyst Arndt Ellinghorst, flying in the face of a pledge by VW to cut production costs and non-profitable models in order to save €5 billion ($5.6 billion) annually by 2017. He adds that the Phaeton — the €1 billion ($1.13 billion) pet project of Chairman Ferdinand Piech that has lost €28,000 ($32,000) per unit sold between 2002 and 2012 alone — is “the most irrational project” as far as budgeting goes, yet lives on because Piech and CEO Martin Winterkorn “cannot let go of their fondness for luxury products.”
Additionally, the Phaeton would not only have a hard time doing battle against the likes of the Mercedes-Benz S-Class and BMW 7 Series as far as sales go (85,000 units annually for the S and 64,000 for the 7 compared to an estimated 11,900 for the new model between 2017 and 2020), but it would also struggle against its own stablemate, the Audi A8. U.S. sales are another likely challenge, as well, considering the automaker’s own struggles in understanding the U.S. market.
Nonetheless, VW is preparing the second-gen Phaeton for its showroom debut between 2017 and 2018, with a PHEV version coming down the pipe, as well.
It makes a lot of sense. While the media, particularly the NA variant, doesn’t like the idea of a luxury VW, the fact that it underpins most of the Bentley line salves the investment some. Also the Veyron used a lot of the engineering that went into the Phaeton. VW leverages the investment rather wisely.
Just because it uses an existing platform there are still a lot of developmental costs involved that just add up to a poor business case. Why eat up all the obscene profits on each Bentley with a car that will obviously have a negative result? Maybe if it were a Tesla fighting luxury EV there might be some justification, but as it is, no
I agree. This is a bad move. I don’t remember it selling well the first time and now there is even more momentum with Audi. Confused by this one.
Definitely did not sell well the first time around. But maybe that’s a good thing, since they lost money on each one sold.
Clearly, VW has as much trouble understanding the value of the Sloan brand model as does GM. Boundaries, people, boundaries.
I never thought I’d see “Veyron” and “investment” used positively in the same paragraph. The Veyron, despite borrowing things from the Phaeton in order to save on development costs, was ANOTHER obscene money-loser for VW AG. Talk about throwing good money after bad!
I think the Veyron was a very successful, if exceedingly expensive, PR exercise at a time when people thought that Bentley’s quality would suffer under VW management. VW came up with what has been called the best production car ever. Not a bad thing to have in your portfolio.
As for the Phaeton, I think that’s just the natural step to take for one of the largest car groups in the world …with an ego to match!(personally I love the Phaeton and to see it coming back to the US market puts a smile on my face though)
The Veyron may have been a successful PR exercise but it was a huge money looser for VAG. Same thing with the Phaeton. Pointless.
I do not concur. The Veyron did things other cars haven’t done before. You can’t really go across town and buy a Veyron alternative. It was a technological milestone, and will always be in the leagues with the McLaren F1 and Mercedes SLR and the like. It was a PR boon, and something worth showing off.
You can head down the street and buy something as an alternative to the Phaeton, from one of four or five other executive class options.
(And you’ll get more cash back when you dump it.)
If it got people to keep buying Bentleys, it wasn’t as big a money loser.
In isolation, sure, but *if* it had that halo/reassurance effect, it could be a net positive.
In theory.
“As for the Phaeton, I think that’s just the natural step to take for one of the largest car groups in the world”
Not for VW, not when they have Audi and Bentley under the same umbrella. Putting out the same platform without the luxury nameplate diminishes Audi/Bentley without sufficiently enhancing VW.
Very very successful PR exercise for VW. VW wants to knock Mercedes and BMW of the Luxury heirachy tree
Not to mention a word I haven’t seen in the first Dozen comments – China.
You know, that place where Audi’s are so popular that now, if you’re on the government tab, you shouldn’t/can’t buy certain Badges.
Rides like a Bentley, Looks like an Audi, costs like one too – but it’s got PEOPLES CAR! on the front. Goldmine.
@ellomdian
And it would be my pick for the same reason – 150% of the luxury inside, 1% of the douchenozzle factor on the outside, because the whole world will think it is a Passat. Works for me. If I had any need at all for a luxobarge sedan, there would be a Phaeton in my garage right now.
I’d never buy a new one though. Well, not until my income doubles again.
Clearly, the two guys in charge think of VW as their own personal playground, and little things like consistent profits are just something they do in their spare time.
That $733M could have bought a lot of product development for something that has a prayer of making money.
Like a VW CUV?
… that people actually want
Yeah, I’m a little skeptical of VW’s strategy.
I think the managers VW need to some humility before the market. This “we make what we make, and you’re supposed to like it” approach was all anyone had in the 20th century, but now customers expect a conversation and a fast-feedback in to product development. MQB positions them well to take advantage of this while maintaining their economies of scale, but now the people giving the orders need to engage with customers worldwide and see what they really want.
I’d love to be o VW fanboy, and a VW diesel or plugin versien of the RAV4 would suit my needs. But, after my last VW ownership experience, I need to have a real 2-way conversation with the manufacturer in order to consider buying one again.
P.S. Also, remember that, in the US, used cars are an advertisement for new cars – because used car buyers get older and have more cash. If my experience is typical, I’d say that Toyota gets a lot of their new car sales because someone owned a used Toyota in their 20s and it was pretty good – so a new Toyota will probably be pretty good too. In order to compete in the US, VW needs to wrap their head around the fact that Americans judge new cars by how 5-10 year old used cars of the same nameplate perform.
Also, the new and used car driver of the vehicle is their customer in the US, NOT the company that employs them.
EDIT: Of course, I’m just some guy spouting off on the Internet. I don’t have the market research to back up my argument. But the folks at VW really should ask their market research people to took in to the points I raised.
This!
One of the reasons I believe that GM did so badly in the 2000s was the crap they unloaded in the 70s and 80s that eventually ended up in the used car market, and soured a lot of young people on the brand. It takes a long time to dig yourself out of that kind of hole. VW has barely begun to shovel.
With very few exceptions, gm cars were really bad in the 90s and 00s too. Its part of the reason I have near zero faith in their cars of the 2010s. I’m 5 years we will have better hindsight on the near past era…if it were not for trucks and full size SUVs gm would have probably gone bankrupt and be long gone since 1992, a year when they were in dire financial straights and almost went bankrupt.
Some product improved in the 90s as C, H, and K-body were solid depending on engine choice and GMT360s and GMT800s from the period have racked up some insane mileage. Z-body Saturns have a following, myself and my family put 168K on one and sold it running. Now the 00s, well alot of stuff did go downhill.
You could even get longevity out of an N-body. Plenty of Achievas, Skylarks, Aleros, Grand Ams, Berettas, Cutlasses, and Malibus have roached through 200k miles.
“Clearly, the two guys in charge think of VW as their own personal playground, and little things like consistent profits are just something they do in their spare time.”
This is exactly VW’s problem: that there’s a couple of VIPs—or possibly just Mr. Piech himself—at the top providing direction and everyone else is pretty much a yes-man.
VW’s actions give the impression of a company that’s afraid to admit it, or it’s leadership, might not be perfect.
Really interesting article on the family, and Ferdinand Piech in particular:
http://www.spiegel.de/international/business/the-porsche-story-a-fierce-family-feud-a-637243-3.html
Forgot the TL;DR – Piech’s family owns more than 50% of VW-Porsche – it IS his company, unless his siblings and cousins can kick him to the curb. And with the company making them money hand over fist, and #2 going on #1 in the world in sales, don’t hold your breath on that one… The Porsche side nearly followed Wiedeking into disaster (Piech effectively saved their financial asses), I doubt they will rock the boat this time.
No PR is the big thing for VW. In overall costs this is chump change, but brings in vast amounts of attention for VW the Corporation
Ahh, two Volkswagens side by side.
Reminds me of my father’s minibuses:
one to drive, and one for parts.
[Ducks]
My 2001 Jetta (owned in 2007) reinforced the notion that Volkswagen’s should always be owned in pairs for this reason. Multi-generational brand heritage!
“This doesn’t look like your father’s Volkswagen, but the soul us the same!”
The good thing is that my dad had me wrenching on his minibuses with him when I was four or five.
I remember reaching up as high as I could reach with a screwdriver to remove a taillight enclosure off of the parts van. :-)
It was summer, and my dad was drinking the Montessori koolaid.
Good times! :-)
That’s a race car driver’s house if I ever saw one!
I thought this was…
https://lh6.googleusercontent.com/-RrLdINRNEbk/UHHD8siyxiI/AAAAAAACEkY/_uA-evvXtSI/w960-h639/224581_10151254581643278_1136362048_n.jpg
Ricky Bobby’s house
When BMW has $50K+ 3 series and 70k+ 5 series I can sure see the new Phaeton selling. Not making record sales for cars in that price range. But, selling enough to showcase their engineering. Essentially an Audi but with a $15k to 20k discount. Having said this, I hope VW is able to produce 7 passenger SUV before this is for sale.
One’s a BMW the other is a VW the “people’s car” Well, the “people” don’t spend $86,000 USD on a car, unless they’re 1% people and they don’t see themselves as “people”. Even the Audi A8 is only $77,400
Yeah, and you can get into a Porsche Macan (possibly even a Macan turbo) for that price too, but that doesn’t mean they are competitors. I doubt many people shopping a near luxury/luxury BMW are going to shop an expensive VW sedan. They’re going to cross shop an Audi S6/8.
People also buy $100k Cadillac Escalade’s when they can save $45k on a loaded Yukon. People will buy the “people car” and a lot of people will have kittens over it like yourselves. It is about owning a unique car. You can see A8’s and 7 series all over town. Go to Miami and they are BMW’s are like Civic’s or Camry’s for the majority of the USA. Having a different luxury car is valuable for some people. By the way, the Macan rear end looks like an AMC Pacer.
“People also buy $100k Cadillac Escalade’s when they can save $45k on a loaded Yukon.”
A loaded Yukon is 66,770 a loaded Escalade is 91,875. So, 25k not 45k.
A loaded Escalade ESV is over $97,000. Maybe you were looking at the 2014 models.
First of all, you save about $10k going to a Yukon over an Escalade. Some people do this becuase it’s cheaper, some because the Escalade is fugly. Either way GM MAKES MONEY.
this is not true of the Phaeton which does not sit under a luxury brand name, nor does it make money.
VW has worked slavishly to transform themselves into a brand that caters to sorority girls in Beetles and Eos’s, Hipsters in Golfs, boy racers in GTI’s (your name here?) or faux intellectuals in TDI’s.
it’s the truth and you know it.
Admit your shame!
I was off a few thousand. But, you need to research a bit before posting. Loaded Escalade ESV is over 97k and a loaded Denali is around 70k. And both auto makers are making crap loads of MONEY. VW made 2.2 billion in the first quarter of 2014.
” It is about owning a unique car”
Like the Kia K900 that nobody bought?
That was one of the worst car names ever!
A fully loaded Yukon Denali XL is $80,305.
A fully loaded Escalade ESV Platinum is $97,565.
My “rough” math says that there’s about a $17K difference between the two. I don’t know how you even got $45K.
VW already showcases their engineering across the line.
They showed it with the dismal reliability of the MK3s and 4s.
They showed it with the EA888’s problems with carbon buildup, camshaft wear and other pretty rudimentary issues.
They showed it with the turbo failures of Audi’s 2.7TT.
There’s no need for them to show anymore with this guaranteed money loser. Audi A8 is struggling to sell as is. Imagine taking away one of the huge draws to it (legit luxury brand).
VW’s hubris, and VW fanboi apologism, are boundless. I wish I could invest in these commodities.
– 2007 Rabbit owner.
VW16,
Yes they sure will, it will give VW the specific brand a lift. They are still working on that SUV
If you spend $86k at a VW dealership and don’t leave with at least three cars, then you paid too much.
No joke. I personally wouldn’t pay $60K for a K900 with the same badging as a $15K Rio and likewise I wouldn’t pay $86K for a Phaeton with the same badging as an $18K 2.slow Jetta.
So, if they changed the badge you’d buy the same car?
Isn’t that pretty much the definition of a badge whore? I’d buy a 3-series if it had Wartburg badges, and I would buy a Phaeton too if I was in that market.
Well, it will give me something else to poke around in at the dealership when my Jetta is getting routine oil changes. They certainly won’t all be out on test drives.
I am seriously starting to think that VW management is mentally ill.
+1
you don’t spend $90k on a VOLKSWAGEN. And if you do, you realize your mistake the first time you take it in for service to your local backwater VW dealer where the service advisor picks his nose before telling you to go wait for your car next to the vending machine along side of all the other VW customers, which if you can afford $90k for a car, is likely a demographic with which you are not comfortable.
VW has been slow to the market on having a 7 passsenger suv for the USA. Yet, world wide they made over 4 billion in profits last year. Maybe they don’t need that therapeutic milieu.
when’s the last time you saw something new out of VW since MQB?
Like, on a dealer’s lot.
Did you read about that billions in profit thing ?
yes, they make billions in profit in parts of the world where, yes, a VW might be a better choice than a BYD or a Soong Yang, or a Renault or a Fiat, or a Mahindra.
And they make billions in profits in places where GM, Ford, Toyota, and Nissan offer cars for sale too. You know, the rest of the world.
@Krhodes
Make Billions in places that Ford, GM and Nissan are struggling to make a profit or a fairly meagre profit in comparison
“Yet, world wide they made over 4 billion in profits last year”
Point is, they could be making even more, and would have the revenue crown, if they could swallow their pride.
They certainly didn’t make that $4B in North America.
I can’t speak for European buyers, because I don’t know enough. But in NA, Phaeton was and will be a total no-go. It has practically the same prestige of a Hyundai Genesis.
That kind of prestige is OK for the $40k~50k range. But not more.
@wsn,
Making a fortune outside NA, the U.S. is just another market to them
Well, I’m game for another round of MASSIVE depreciation Phaeton window shopping come 2020. I’m expecting the over/under for one at 30k miles at around…$40k.
I agree, but less than 40. The issue is though, its one or two major repairs from bankrupting you.
Agreed on less than 40k in no time at all if they follow the trajectory of the old models. Not hard to find ones well under 10k.
More than a buck a mile for just the depreciation!
The sad part of it is that it’s very, very likely to be true.
Another way to look at the depreciation of a VW Phaeton is that just sitting in the owner’s garage, it’s losing more than a dollar of value every hour, day and night.
The report must originate from Andy Horowitz or The Onion. Next: Kaiser-Frazer returns with an executive Tucker.
Seems foolish when a car if that size and content would be far better marketed as an Audi.
IMO, they should decontent the sh1t out of it and go after plain jane full sizers, the rental and fleet markets just to get their numbers up.
You could have something on the rental fleet end and VW. Seems like the last few years Volvo and even Toyota have been big in rental fleet sales to keep up the numbers.
Fleet sales percentages for the Camry and Jetta are about equal.
Funny how you never mention this.
I don’t have any statistical data to prove this. But in the past year I’ve seen very few Jetta rentals. And a crap load of Camry rentals. I swear Toyota found a way to sell to rental agencies with out adding it to the fleet numbers on the books. Same thing with the corolla. Just a side note. In the movie Mortdecai. Toyota’s are referred to as Toyota clit’s.
Rental agencies don’t want to lose business by having their rental VW’s break down, leaving their customers stranded and waiting from a hand from a tow!
The decontented Jetta is, surprisingly, a pretty reliable car according to Consumer Reports.
volt, VW’s broken down all over the roads? I don’t really see that happening. Do you actually see more VW’s broken down on the road. Or was they just a simple sentence to type out?
I already provided the fleet data to you in a previous thread.
The facts obviously mean little to you. Then again, you’re the same guy who refers to the Japanese as “Japs,” so it’s not exactly a surprise.
Pch . why do you act so timid. – yawn..
I tend to agree, but … why have this and the A8L?
Is the difference meaningful?
(It’s a segment I don’t pretend to comprehend.)
Pouring $700M into a large luxury sedan isn’t the issue. The issue is it should be the A8. A8 unlike Phaetons sell well in all markets. Use the A8 to underpin Bentley or whatever.
But unfortunately rental agencies don’t offer decontented vehicles any longer, not the top of the line, but more like middle of the road.
Why? The A8 is just as nice, but has a different mission. Sporty luxury, more like the 7-series. The Phaeton is more like the S-class.
I suspect there are some financial reasons behind all of this, and not just vanity. Sort of like how Porsche was able to charge most of the development expense of the Cayenne to the Toureg. Maybe it is advantageous to charge off expense to VW that would otherwise be assigned to Bentley? Just guessing, but definitely a possibility in the realm of management accounting.
Personally, I see no real distinction between VW and Audi anyway. Audis are upmarket VWs and nothing more. Very little different than Chevy and Buick. There are nominally VW platforms that Audi uses, and VW used to use what were nominally Audi platforms too. It’s all one big happy family at the end of the day, the Porsche-Piech family. Scheming and plotting cousins and siblings.
The root of the problem is about the identity of VW.
If the leader at VW wants to make it a respected full line brand. Then, what’s the point of acquiring all the other European brands? Dump everything including Audi and use Phaeton to fill that void.
If he chooses to keep all the other brands, then it makes the most sense to define VW as the cheaper and lower brand in the group.
the leaders at Audi want to drive Audis or Bentleys, but they can’t. They have to drive VW’s. The answer therefore must be to build a VW that classes with the Audis and Benleys for VW execs to drive. If they happen to actually sell a few of them on the open market, that’s nice too, they guess.
FractureCritical,
WINNER WINNER CHICKEN DINNER! Mitsubishi does the same thing in Japan. Mitsu elite businessesmen can’t drive competitors cars so they license Nissans and badge them as Mitsus. They have a rebadged Infiniti dubbed their 2nd Generation Mitsu Proudia, which is an Infiniti Q70. Fun fact: The first generation Mitsu Proudia was a joint venture with Hyundai as the first generation Hyundai Equus.
@WSN
VW is not the bottom of the group, more like middle. Something like:
Seat-Skoda-VW-Audi-Porsche-Bentley-Lamborghini-Bugatti, with the last three being sold at obviously tiny volumes but gigantic prices.
In the rest of the world, VW IS a premium brand, though not necessarily a luxury brand, they are not synonymous. To the traditional VW buyers in the US, I think this is probably the case as well, but that is not a mass market here – non-lux premium. In Europe Skoda occupies the segment that most on here think of when they think of VW – a cheapish basic car – “cars by the pound” relatively speaking. Seat is cheaper still, but decidedly sporty across their lineup.
Hey krhodes1. If by rest of the world you mean Europe, I’d agree with you. However, in Brazil and I’m sure in many other parts around the world, VW is not premium. If the Europeans have really bought that notion fine, but not everyone else has. That to me is part of VW1s problem I think, they can’t define even for themselves if they are or not premium.
That being said I have no problem with this car and agree with you. If someone likes this car and won’t buy it because it’s a Volkswagen, then the problem is theirs not the cars. I remember the days when all mainstream brands had premium offerings that competed and did well. I wish those days would come again.
South America is kind of special for them though, no? They operated as pretty much a separate operation from Wolfsburg, selling a lot of locally produced and developed product that did not get sold elsewhere. Lots of unique to Brazil VWs, though they did export the Fox (Gol there, right?)here for a while as an entry level car. My ’02 Golf TDI was Brazilian built, and very well put together.
The predecessor to what they tried to do here with the Passat and Jetta, and a whole lot more successfully.
Yes, South America is unique. But the Gol got exported everywhere, from the US to Russia, the Middle East to Mexico. I wager that in all these places they tried to sell it for a bit more than the competition, so I guess that’s the premium. Some people accept that, some don’t.
As to Fox, I think it was the Voyage a Gol sedan, and I think you also got the Gol station wagon, called Parati here. But I don’t think you ever got the Gol itself.
And I think you are among the first here to actually like their Brazilian Golf. Lots here don’t, but I would guess that most that disparage it talk more in theory than as an owner.
So a “Gol” was a hatch, but the other versions got different names – interesting. The Fox was a 2dr or 4dr sedan or a three door wagon here. And yes, definitely a premium feeling car compared to the other cars in its price range back in the mid-80s, at a small premium in price. Big 1.8l motor. Friend of mine put 250K on one. Pretty archaic by the early 90s though, with no power steering or automatic available, they must have been a hard sell in a lot of places, but they sold well here in Maine.
Very few on here have owned Golfs. The Jetta outsells it better than 10:1 in the States, and back then the Jettas mostly came from Mexico. I found the build quality of the Brazilian built Golf slightly better than the Mexican Jettas, but it was also different in a lot of details. Either seemed completely acceptable. Mine was a great car, wish I had been able to keep it longer. I have stayed in touch with the guy who bought it from me, it’s still on the road in NY with a gazillion miles on it. I did some nice upgrades to that car, Euro headlights with fogs, leveling and the washer kit, the GTD instrument panel with trip computer, and rear fog light. First new car I ever bought. 50mpg easy on the highway, and quick too. I still miss that car – one that got away.
My mom’s boyfriend used to own a 1992 Mexico-built Jetta MkII.
It was a pile of sh*t in pretty much every way! Severe rust (including several holes in the hood), door handles that didn’t work, speedo that didn’t work…sure it wasn’t treated super great by its previous owner, but that’s still pretty terrible.
Jack’s Filet o Bricks McMansion was ugly as sin.
What a nice thing to say, I’m sure your doublewide is much more impressive
Lie2me +1
He jelly.
Personally, I think it needs more garage space.
I just want to extend some appreciation for calling my extremely modest sub-3,000sqft house a McMansion.
Too bad you’re probably a dude — I’m looking for people who think things are bigger than they really are.
HAHAHAHAH
*slow clap*
It’s OK Jack, your personality is HUGE!
+1
If that’s anything like those blind dates you were told had “great personalities” Jack’s in big trouble
How about all those girls who were washing their hair that night?
If all Jack has is a “huge personality” then he already knows plenty of women who seem to always have dirty hair
The only real “Phaeton” was offered on the 1979 Cadillac Coupe / Sedan deVille with the American 425 V8.
No VWs allowed here ever again…
@JEFFSHADOW
Plenty of Phaetons around before Cadillac had their 1979 Model
while on the subject on vee dub, my 96 jetta had the air bags deployed when i drove across a speed bumb < 4 mph. It popped very loud.
I read on vortex another similar incident similar had happened to another guy.
my insurer ICBC of van bc insisted of writing her off.