It didn’t take long for sources to squeal about the size of the settlement forged yesterday between Volkswagen and its ornery U.S. dealer network.
According to people familiar with the deal, 652 VW dealers will share about $1.2 billion to offset losses from unsold vehicles and sunk costs, Bloomberg reports. But cash is only one part of the company’s plan. The other involves its customers’ wallets.
According to the report, VW will offer other dealer benefits on top of the cash payments. The sources didn’t say what those benefits might be. The settlement brings VW’s total U.S. scandal payouts to roughly $16 billion.
Dealers took their corporate overlord to court after feeling that they’d been left high and dry in the wake of the diesel emissions scandal. Many spent large amounts of money upgrading their dealerships, only to have their lots filled with sidelined diesels and few customers.
The automaker has already agreed to give its North American operations more autonomy, as well as boost production of popular gas-powered models (and potentially popular future models like the 2017 Golf Alltrack). VW seems to recognize that product is only half of the equation. Pricing must be attractive.
Speaking to Bloomberg, Alan Brown, chairman of VW’s U.S. dealer council, said the company plans to lower the sticker price on its vehicles. The automaker “is looking at this with a volume mindset,” Brown said.
Consider this proof that VW’s semi-premium product/pricing strategy is dead, at least in the U.S. To sell an Alltrack, it’s a no-brainer that it must be competitive with its Subaru rival. The automaker wants a broader crossover and SUV lineup to boost its sales, which means the looming Teramont three-row SUV needs to be priced to compete with the Japanese, not the Germans.
[Image: Volkswagen]
(Gasp!) Lower its Prices…
Read: Decontent its vehicles.
Many of the current vehicles already are or seem to be decontented, which is what many people have complained about.
Lots of cheap plastic and thin upholstery already present yet VW prices are higher than the Japanese models which makes them overpriced.
VW could always bring back the manual doorlocks and rollup windows and manual side mirrors and put in a basic AM/FM radio. Now, that’s a decontented vehicle!
Wait, it’s VW! Expect the decontented vehicle to still be overpriced compared to other brands’ vehicles.
Never mind!
Seems like they’ve come to the end of their road.
For the second time. First time was about 1973; the Beetle format had gone about as far as it could. The 411/412 wasn’t selling and the Type 3 was about as long in the tooth as any non-Beetle car could be.
They solved that one by buying NSU and getting control of Auto Union – and then just passing off NSU’s new cars and some Audi models as VWs.
And that took them two generations forward. Now, they’re that much more rigid in their thinking and their balance sheet is hurting from penalties and buybacks. This time it will probably be VW who gets bought. By whom? Maybe the question is WHICH Chinese company?
And can they salvage anything?
VW has not been a volume company since they gave up making the commodity Rabbit/Golf. They tried again to do something like that with the VW Fox – and failed. Low volume and high markup; exclusivity. The SPECIAL People’s Car Company – Sondervolkswagen.
I don’t think it’s gonna fly.
Anyone who thinks VW will sell to the Chinese has never been to Europe, or perhaps is totally ignorant of a world outside of US borders. People in the EU don’t want asian cars, VAG products sell there the way Chevy trucks sell in the USA.
Snark aside, while I’m not completely cognizant of the Euro market, I know there are many differences. For one thing, auto ownership is not a universal. The total cost is much higher and the vehicle us used much less over the course of ownership.
I doubt the European market, even if solidly profitable, can afford the multiple missteps and costs they’re running up in America. Nor can it make up for the loss of sales and market as VW tries to sell on price alone. That’s been done dozens of times before – the most famous case was Lido’s pumping out the America K-cars. They sold and even made some money; but they were not memorable and Chrysler in the end was hurt, not helped. It took the French boys at AMC to revitalize and repair.
As to, not selling to the Chinese but being bought BY them – a passive action done TO VW…they may have no choice. If profits fall and costs rise and the markets and the patents and designs are all apparently worth more than is reflected in stock price…someone will make a run on the stock. I understand the German government has some control over VW and over corporate mergers, but when the alternative is either liquidation or a bailout; and with the German government itself facing some extraordinary costs…they may have little choice.
Time will tell.
“VW has not been a volume company since they gave up making the commodity Rabbit/Golf.”
Huh? VW vies with Toyota for the title of world’s largest carmaker. If that isn’t volume, I don’t know what is.
And by the way, Chrysler in the early-mid 90s had a great management team who completely revamped the company’s product line in only a few years. They came from a number places, but they weren’t from Renault.
VW is irrelevant in US, true. For them the US market is merely an afterthought. They are huge all over the world and their key markets are Europe, China and South America. They are selling 10 million cars a year, out of which less than 1 million in US. A hiccup in the US will not stop their quest for world dominance.
Decontent further? What will they do? Start importing Mk4 Jetta/Bora from FAW-VW?
VW still haven’t seemed to have learned that their biggest issue is not pricing, but that of trust. Trust that their car won’t have a major powertrain issue in the first 50K miles, trust that any warranty issues won’t be rejected for no reason, trust that these expensive repairs will actually fix the issue, not make things worse. Trust that they won’t blatantly ignore environmental and health laws to save few bucks.
Until the company learns to actually respect their customers, really, I can’t imagine the company will climb out of their current niche.
this, 100%.
VW please sign me up for a stripper Jetta S five speed for $12k. I honestly don’t care if after 5 years 50,000 miles I throw it away.
If anyone else knows a better car for the price please let me know.
I would, except that your mythical $12k Jetta doesn’t – and won’t – exist.
It does exist. Here:
http://www.rockvillevolkswagen.com/VehicleDetails/new-2016-Volkswagen-Jetta_Sedan-1.4T_S-Rockville-MD/2822696003
May get if it drops below 10k…
12k? Those days are long gone. That’s used car territory, and even then it’s a tough sell for anything not extremely high mileage or worn out.
Wouldn’t it make more sense to buy a $20k vehicle that you can use for 10 years 100,000 miles? Or at least isn’t at ‘zero value’ at 50k? If I have any major issues with a vehicle before 150k I’m not a happy camper, but then again, I’ve never owned a VW.
You can get a Jetta S in the $15-16k range new, I don’t think $12k is going to happen unless you can remove all of the increased regulatory additions in the past 20 years.
Around here the dealers have Jetta 1.8T SELs with nav etc. for under $20k.
$5.5k under MSRP is a fair amount of cash on the hood – especially when it makes it competitive with a Corolla (while having 40-odd more horses and the turbo torque curve).
So, yeah, not gonna get a mythical $12k stripper, but they can actually try and compete now with the crazy incentives.
You can get an SE with Connectivity or a Sport auto in the low 17s in my area (DC Metro). That gives you Nav/Carplay, heated seats, pleather seats, etc. These are cars with $22-23k sticker prices. A base Jetta S can be had well into the 13s fairly regularly here as well.
I will say though, this is purely dealer price cutting. The national incentives are barely cresting $1500 at most, and invoice minus holdback can’t be much more than another $1k on a car that cheap to begin with, so the extra $2500 has to come from somewhere. It truly might be a “we’ll take a loss on every one we sell and make it up in volume” situation, where volume means hitting incentive quotas to get a bonus from VW.
Scirocco?
Stack ’em deep and sell ’em cheap? We all know how that worked out for GM in the late aughts.
The Alltrack S manual is supposed to start at $25850 USD, so at least it’s priced somewhat competively if someone is cross-shopping a Subaru.
http://www.emichvw.com/assets/misc/9890/PDF/2017_VW_Golf_Alltrack_order_guide.pdf
Seems a little pricey considering a similar sized Subaru Crosstrek starts at $21.6K and Forester at $22.6K, and you are fighting against an established reputation of Subaru in the genre.
They need to cut $5K off that price without decontenting to be actually be competitive.
5 grand!!! That would put them bizarrely out of step with the rest of the us industry price wise. Seriously, the outback starts at 26k and is a smidge bigger. The all trek has nicer interior everything at that price, far more torque at lower rpms, two (both much better) transmission options etc…
Judging by the size of my Jetta and my relatives Impreza hatch (same style as the Crosstrek) the Alltrack will be a bit bigger. And the interior quality will be night and day different, the Subie’s are chock full of cheap, hard plastic. Seriously, go sit in a 3 year old Impreza/Crosstrek and then in a 3 year old Jetta and tell me that there’s any comparison.
I really don’t understand, what’s the deal with VW pricing? Why US made Passat costs more than US made Accord? Although, I understand that price per part made for Passat does cost more than par made for Accord. But is it that bad?
Does it?
The pricing is actually fairly similar on lower trim lines. The real problem is that VW’s pricing goes insane once you try to step up to the higher trim lines on the Passat. The TDI SEL and the V6 SEL were both $36000 cars which is frankly completely insane pricing. It seems that VW has already decided to drop the price on the 2017 V6 SEL down by $3000 (you can see by looking here at the 2016 price: https://www.vw.com/models/passat/trims/2016/v6-sel-premium-trim/ and here for the 2017: https://www.vw.com/models/passat/trims/2017/v6-sel-premium-trim/) which finally does bring it in line with what an Accord Touring costs. Problem is that Honda also offers an EX-L V6 sans the adaptive cruise for way cheaper.
On the really low end though with the S and even the R-Line I think it’s priced competitively. But personally I think they need to update the platform entirely for the US Passat, if only to center the damned steering wheel correctly-in the current position it’s hard for a lot of people to get a comfortable hold for longer road trips since the wheel is so far towards your right side that your left arm can’t possibly rest on the door armrest while touching the steering wheel. And the gigantic transmission tunnel that runs through the rear seating is ridiculous to see in a 2017 model year FWD vehicle. It’d be one thing if they actually sold an AWD version of this car but no such thing exists, yet this gigantic transmission tunnel bump is there. It’s literally twice as high as the bump in any competitor.
Yet another link in the endless chain-reaction crapstorm. All because they stubbornly believed, to the point of cheating, that diesel offerings were somehow critical in keeping VW viable in a market that wants the CUVs that they stubbornly refused to produce. Hindsight is 20/20 and foresight was absolutely nonexistent.
Fewer options for everyone! The build tool for the ’17 GTI is now available on the US website. The 2-door is dead, completely. The Autobahn is special order only (that was reserved for the 2-door last year). The SE and Autobahn are only available with the Performance Package, while the S can be had with or without it.
Not sure how I feel about this. I wanted a GTI, but one of the reasons I went with the Mustang was VW’s terrible packaging, and reliability concerns. Looks like the moment has passed, forever. I can’t imagine the penny-pinching that’s going to happen to their production process in the future.
Longtime VW owner, current Ford owner here. Can verify: Ford quality is NOT a step up from VW. Shudder.
OK, so if it’s pricier than the competition, less reliable, with a shorter warranty, fewer base features, and it’s dealers offer the same-old crappy service, can someone explain how that will bring the sales in?
Even though in my experiences I am an outlier in terms of VW reliability (I am a stickler for maintenance) that is the Achilles heel for vw.
I’d accept prices slightly higher than the competition if their cars were of top quality and with stellar post-sales experience. But they have zero track record there. They need to operate a loss-leader portfolio if they want to eventuLly reap the rewards of better reception.
Systemically, VW is stuck with some recalcitrant operating costs which it cannot get away from very easily. So, lowering prices is impossible without decontenting, etc.
Hire a thin skinned con man with a japanese wife to market the hell out of it, it’s worked before, supposedly.
You sell the product cheap and then make up the difference by inflating the price of replacement parts.
Time to bring the Polo GTI over?
Interesting times for VW. They lost me not on the TDi I owned but when I did a rear brake job and had to buy a special tool because they spec some odd fitting.
What is strange, is that between the settlement and the good will package, it works out to almost $4k in “refunds” I sort of randomly get back on this car. Subtract the Diesel Particulate Filter failure at 83k for 1300 non warranty dollars, and it is still pretty ok.
I will let you know when I get the buyout check :)
I had a GTi 16v, a Scirocco with a callaway turbo, two ur-VW diesels, with a few others tossed into the family. You had to work to lose me.