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Volkswagen is doing badly in the US

Chief executive officer for Volkswagen USA will be in for a long haul when he sits for one the top positions this coming September 1. The German automaker, which is popular for its bug-like cars, is not doing that well in the United States.

With this alarming situation at hand, Volkswagen USA chief executive officer Stefan Jacoby flew into Auburn Hills in Michigan, which is the headquarters of Volkswagen, this month to meet the management team he is about to govern. Coming in two months earlier than his expected post will allow the 49-year-old CEO Jacoby, who worked for Volkswagen and Mitsubishi UK, to do something on the current status of Volkswagen sales in the US. For the last two years, Volkswagen lost an alarming $900 million in the US, thus it is no wonder that CEO Jacoby wanted to start things early.

In order to cut out the German automaker’s American operation, Volkswagen had to find more fixed costs. Not only that, US dollar is a little weaker than it was last year against the euro. These factors made it awfully difficult to reach new Volkswagen Chairman Martin Winterkorn’s target of breakeven in the U.S. by 2009.

Sales are off by more than 100,000 units a year from 2003. Sales of the Jetta are off 6.3 percent, and Passat sales are off 30 percent. Touareg sales are down 28 percent. The New Beetle is down 20 percent. The current problem Volkswagen US is facing can be far more difficult to solve. It could take years in order to alleviate the stand of Volkswagen, but VW Chairman Winterkorn is only giving CEO Jacoby two years to resolve this. The new VW US CEO Jacoby will be tasked to erase nearly $1 billion in annual losses in that restricted period given by Winterkorn.

Some of the factors seen as causes for the billions of losses of Volkswagen USA is that VW heavily relies on high-cost European manufacturing. VW has a plant in Mexico, where labor is cheaper, that makes Volkswagen Jettas and new Beetles, amongst others. Although Volkswagen is able to save on the work force, the plant still uses about 40 percent of European-made parts that cost too much after currency conversions. For this, CEO Jacoby is actually considering of having a highly-ambitious US-based plant for Volkswagen. If this up-to-the-ceiling plan will not push through, Jacoby is set to work things out with German bosses about making full use of the Mexico-based VW plant. Cars that will be made in that plant will utilize more Latin American- and US-made parts.

This entry was posted on Tuesday, July 24th, 2007 at 4:49 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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