Not only Detroit is in trouble

Lately it seems everyone in the auto world ( myself included ) craps on the Detroit 2.5 group with regards to profitability issues. We have a habit of forgetting that other automakers are having issues, but that is far from the truth. Volkswagen in particular is in a very difficult situation as of late – after losing billions in 2004 & 2005, they will post a loss for 2006 for sure, and expect to post a loss the next 2 years as well. They hope to turn a profit again in 2009 – ouch. Why? Well, let’s take a look.

First, one of the age-old copout answers, is the exchange rate. The Euro has gained value vs the dollar, which puts stress on profits. VW is looking to produce more cars in Mexico to help take the pressure off this.

More importantly, I think VW’s failed attempt at becoming a luxury line is more to blame. They also have a problem shipping the right product – dealers often complain of lack of base model Jettas and Golfs ( now Rabbits ). I bet they have plenty of Phaetons and Tuaregs ( who in the f*ck thought up that name btw? ) though. Once VW gets back to producing cheap, fuel efficient vehicles, they’ll be back in the black. And hopefully they can work on the whole dreadful quality thing too. You listening, VW?

Source.

Published on December 13, 2006 in Volkswagen

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