I think what will stop VW from selling this car is its service and its lack of customer incentives and plans...or lack of advertising. VW's current commercials are absolutely crap in my opinion. They have less to do with the cars and more to do with if someone feeling happy today. They are bordering on stupid. They may have worked and were cute when VW was on the rise again but now they need to make commercials that reflect their cars...not a lifestyle. Some of them are downright childish. So if they don't want to be mistaken for Saturns, then they need to stop making commercials like the ones made for Saturns.

I've seen the Phaeton a few times on the road. It has a presence that neither the BMW or nor the Benz models have...it's a huge car but doesn't have that bulkiness and awkwardness that the others have. It could also be that I'm completely and utterly sick of seeing the BMWs and Benzes everywhere...they were bland to begin with and having seen so many of them makes them even more bland.

Modified by Integrale at 8:56 AM 1-15-2004

That may be an excuse used, but the reality is that it doesn't cost Volkswagen $95,000 to make this car. The overall investment is huge, but VW has to work that out over the long run if they are really serious about the Pheaton in the longrun.

However you bring up an interesting point on the Audi A8L. If VW is pricing the W12 Phaeton at $95,000 what price point is Audi going to offer the A8L W12?

im 24 and i drive a lowered gti

I could write a whole other column about how VW's marketing has fallen on its face completely and lost all its momentum that it once had. I don't know if spending got slashed big time, Arnold has gotten to big for thier britches and/or the marketing people at VWoA aren't cutting it anymore. It is probably a combination of all the above, but they can't blame the problem completely on stale product. They did a lousy job of promoting the New Beetle convertible, the 20th Anniversary GTI, building marketing and leasing programs for the Jetta and Golf (remember the Trek bicycle tie-in with the Golf III/Jetta III at the end of its lifecycle), marketing the Phaeton and more. The only vehicle that has gotten any recent attention is the Touareg and even that could be more aggressive.

My guess is that the shoe is going to drop at VWoA very soon and there will be another management shakeup this year.

I can't see someone, let alone myself wanting to spend $95K on a car, driving up to a VW dealership with all of the vulchers perched outside, smoking their cigarettes waiting for their chance to get the next customer that drives on the lot. I think VW dealerships are a looooooong ways away from being able to sell this car still. Most still can't even get it straight with a $50K Touareg.

On a flip note, Audi has it down and knows how to treat their clients. Is that worth an extra $20K, you bet it is. I guaranty you, those including myself who can purchase this level of vehicle could care less whether they spend $95K or $125K. They want a high level of professionalism and service that VW still can't offer on a $50K, $40K, $30K, $25K, $15K car. Instead they would rather argue with their customers about a $4.00 window regulator. Good luck VW

The Achilles heel of German automakers, in the American marketplace in particular, is their utterly blind refusal to acknowledge this behaviour on their part, and to make ANY effort to modify it in order to make themselves more adaptable and able to adjust to changing market conditions. Arrogance and hubris may be attractive in der Vaterland, but it has a limited utility or appeal in the more egalitarian American culture.

THAT'S why VW continues to stumble along in the US. The Phaeton will simply join the Volkswagen lineup of might-have-beens. It's sad.

Please read my latest article in Automotive Traveler! Link: http://automotivetraveler.com/jump/1364 Thanx, and leave a comment at the end! ☺

Quote, originally posted by vwvortex1 »

That may be an excuse used, but the reality is that it doesn't cost Volkswagen $95,000 to make this car.

What is the invoice...and how much does this car cost to make...including R&D. I would bet that even at $95,000 VW may be taking a beating. Remember they built this whole glass factory like something out of willy wonka. I wonder if it has that moat made of chocolate, and that boat that "keeps on going and going with no sign of slowing...".

Anyway, as I was saying... if they sell every Phat-ton, they make in the first batch. It will go to cover salary and the factory... VW will not start making money until the 2nd or 3rd batch. As an investor I would be scared poopless, as a consumer I am excited as 2004 Phat-tons become available in 2007 for $25-$40 gs. Don't believe me...look up the resale of the MB 600's and BMW 700's...not so good.

The thing that really scares me is the technology...my dealer and mechanic has a hard enough time with my VR6, I don't think the W12 conundrum will be solved for at least 5 to 6 years.

What VW should do is offer a lifetime, non transferable warranty, on the W12 ... this worked for the Koreans. Especially if you can have a guy come to your house and take your Phat-ton anytime you need servicing for the life of the car! They are only making a few of these pups, if I had the $, This may twist my arm a bit. But this warranty would HAVE TO BE BEATEN INTO THE CONSUMER KIND OF LIKE USING CAPITAL LETTERS.

Actually the Glass factory costs and implications has been blown way out of proportion. It cost VW somewhere roughly 200-250$ Mil USD to build it. Consider in contrast GM, Ford, Toyota spend something to the tune of 250-350$ Mil USD per year on advertising alone. So IMO that's Glass factory is peanuts and more of a tourist attraction/advertisement.

"Not another brick in the wall... " - Pink Floyd

I'm not sure if people are aware of just how much the euro has leaped ahead.
A dollar buys ONLY 0.79 euros today. Hello?! It bought 1.1 Euros shortly
after the currencies launch, which is about when VW was tooling up for this car.
They can't afford to lose 30% of anticipated revenue per sale--the rise of $10k
hardly makes a dent in what they are giving up. Also, they can't hedge using
US/Americas based factories for this car--so it will be more expensive.

However, I do agree that the impact on them will be hard. The value prop
of the VW was "12 cylinders for the price of 8." There IS a segment of buyers
that will pony up for an 8, but not a 12. This car was really, in my mind,
targeted at them first. They will not likely "reach" for a VW, even if it has a 12.
Had it been a decision of "well, it's a VW but I get a 12" then maybe they would
have gone for it. Either way, I'll look forward to picking one up in 3 years for $38k.

You would be right--if they were going to sell say, even 1/10th the number of
cars. Do you realize how few phaetons are being built??????? Imagine if Ford
had to have that same advertising contract for every 500 cars it sold!

The sooner Mr. P cracks the whip at VWoA, the better IMO It's been a long time coming given VWoA and dealership crappy attitude.

The T-Reg being an exceptional vehicle luckily manages to sell itself even with the lousy advertising. But witness the failure of lesser ones like the W8 Passat. VWoA's advertisement definitely needs a overhaul. It's no longer the leading edge it used to be. I always wonder why VW won't just play some of their excellent European ads in the US market. I am sure they will have a greater/better appeal.

95K by itself is not unpalatable. But atleast if the service and customer support were spotless it would help. Granted VW should have probably used the Lexus approach and underballed the price. But I guess this would have made Audi pissed considering that the A8L W12 is gonna be over 100K$

Modified by lonewolf at 10:50 AM 1-15-2004

"Not another brick in the wall... " - Pink Floyd

I know if I was buying a Phaeton I would pick it up in Germany from the Willy Wonka glass palace. Make a trip of it. I can't imagine buying a Phaeton from my local dealership, then the poor consumer has to go there for servicing. With a car like that VW should limit service to a number of choice dealers and offer delivery & pick-up.

The Glass factory's total maximum capacity possible is roughly 50K cars (i.e. Phaetons) per annum. Currently I believe they make some 40 cars a day and there is no fixed or lower limits on the number of cars produced in a day. The assembler working can take any amount of time he/she deems fit to make a Phaeton.

Considering that into the equation (i.e. breaking even or making money at that low volume), I don't think it's a big drag on VW.

"Not another brick in the wall... " - Pink Floyd

Then I did an about face on my opinion of the pricing change when I remembered the power of perception. Might VWoA be trying to build a high-end customer base by trying to make the Phaeton appear more exclusive? The more expensive the product, the more exclusive the customer base. The more exclusive the customer base, the more folks who can drop 95k on a car want to get into the club. Keep the plebians out!

Also, 85k is to 95k what 20k is to 22k...give or take. Only a marginally larger smack to the wallet.

Why do you think VW and BMW want to start producing cars in China?

Obviously it isn't going to cost VW $95K to build the car but once the exchange is done the profits could look dismal, Germany is also a Tax jungle.

I think company's like Porsche are very intelligent, they used hedging and bought contracts for Euro/Dollar exchanges not too long ago when the Euro was weaker than now. I don't think too many company's had a clue that the EURO would grow almost.....40% over the dollar in the last 2 years. Porsche has some playing room and can discount a little to keep customers

This right here says it all:

[URL][http://www.detnews.com/2004/autosinsider/0401/15/autos-36758.htm/URL]

Thursday, January 15, 2004

U.S. automakers' brands get a bum rap

By David Kiley / USA TODAY

Perception of car quality
Some car brands have better quality than buyers think. But for some brands, buyers think the quality is better than it is. Brands whose actual quality meets or exceeds perceived quality by percentage:
Mercury
42.3%
Infiniti 34.1%
Buick
29.7%
Lincoln
25.3%
Chrysler
20.8%
Lexus
17.4%
Porsche
14.2%
Oldsmobile
13.6%
Saab
12.2%
Acura
10.5%
Subaru
9.4%
Toyota
8.7%
Cadillac
8.3%
Nissan
5.2%
Jeep
3.5%
Suzuki
3.2%
Honda
1.2%
Ford 0%

Brands whose perceived quality exceeds actual quality by percentage:
Land Rover
75.3%
Kia
66.6%
Volkswagen
58.3%
Volvo
36.0%
Mercedes
34.2%
Mitsubishi
34.1%
Hyundai
27.4%
Audi
26.4%
BMW
12.4%
Isuzu
8.5%
Dodge
7.4%
Saturn
7.3%
Pontiac
3.0%
Jaguar 3.0%
Chevrolet
1.8%
Mazda
1.2%
Source: Morgan Stanley

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DETROIT — Ford Motor's Mercury is the most under-appreciated brand for quality, while Ford's Land Rover is the most over-appreciated, according to a report by Wall Street firm Morgan Stanley.

The firm used J.D. Power and Associates' 2003 Vehicle Dependability Study, which tracks reliability over three years, and CNW Market Research's Perceived Quality Survey to figure out which brands have the most opportunity to change customers' minds.

Top executives at U.S. automakers say they are spending money and time convincing buyers that their quality improvements are real, despite perceptions.

The stakes are huge, says Morgan Stanley's senior auto analyst, Steve Girsky, because much of Detroit's spending on incentives is to make up for the automakers' poor quality images.

"Perceived quality may be a bigger driver of sales than actual quality, and Detroit has reputations to mend," he says.

Morgan Stanley compared the brands' scores in the Power measured quality study against the CNW scores for perceived quality to determine a percentage gap between the two.

Four of the top five under-appreciated brands — those whose actual quality is better than perceived — are from Detroit. But surprisingly, eight Japanese brands also are on the under-appreciated list, including quality leader Lexus.

Europeans crowded the list of over-appreciated brands — those whose perceived quality is better than actual. That included Volkswagen, whose well-crafted interiors and engines have attracted consumers despite several years of falling quality scores and difficulties in getting timely repairs.

VW Chairman Bernd Pischetsrieder says he prefers to be where he is — on the over-appreciated list. "I'd rather have an actual quality problem than a perceptual one, because we can fix the actual problem faster than the perceptual one."

Detroit automakers agree. "It will likely take two cycles of products to make headway, but we have to keep at it in our communications," says General Motors product boss Bob Lutz.

Says Chrysler Group CEO Dieter Zetsche, "We can get people's attention right away with better designs and better craftsmanship, but quality reputation takes about three times as long to get back as it takes to lose."

The biggest gainers in perceived quality between 1997 and 2003 were South Korea's Hyundai and Kia. And they both raised their market share — Hyundai went from 0.7% to 2.4% and Kia from 0.4% to 1.4%, according to Autodata. Each share point is worth about $1 billion per year in gross profit.

Meanwhile, the big losers in perceived quality were Mercury and Jeep, and both lost market share. Jeep went from 3.1% to 2.6%, while Mercury fell from 2.9% to 1.2%.

Kia's U.S. chief, Peter Butterfield, thinks his brand's perception actually lags the reality of its recent quality gains, even if it is ranked as over-appreciated.

Kia ranked dead last in Power's dependability study last year, although it improved in Power's Initial Quality Survey, measuring problems in the first three months of ownership, by 21%. Butterfield says he aims to be in the top 10 in the Initial Quality Study in three years.

While the under-appreciated brands have the opportunity to gain market share as perceptions improve, the over-appreciated brands face a potential minefield, Girsky says.

"Their market share and profitability could be at risk if consumers come to recognize the differentials."

Modified by vw28273 at 9:54 PM 1-15-2004

VW please don't loose sight of you roots and your own name. not all "people" have $80k+ to throw at a "car".

I am sure that it is based on a survey or the amount of repairs done and reported by the dealers. It comes down to word of mouth and experience - I had a Mercury Sable - Not one quirk until 70,000 miles. Then the car imploded. This is well after the warranty so I am sure that those stats don't include my dear old sable...but I am sure Mercury is aware of it. The there must be thousands of bum sables and Tauruses out though -either fleet or rental cars that are well beyond warranty and not reported.

Alot has to also go to the owner - VW consumers are a picky bunch - most of us know more about the car then the dealer, so when we have a suspicion that the car is not at 100% we let the dealer VWoA know about it. This can translate into dissatisfaction when it is not...it is just us being a pain in the ass, which you have to admit, we can be.

Anyhow like I said it is experience and word of mouth, I will probably never buy a Ford product again until they offer extended warranties on all there vehicles, like at least 5 years, 60,000. But that new Mustang sure looks good...

I also think that VW has missed the boat with their ads. I don't meet the "active lifestyle" that seems to have permeated Madison Avenue. I'm middle aged and proud of my economic status, so don't insult me with what the car will do to my lifestyle. Show me what the damn thing will do for my driving - kind of like the Acura ads, come to think of it.

Er... you do realize that VW sells a boatload of vehicles outside of US in Europe and other parts of the world. (quite like GM etc sells boatloads in US) The US sales of VW while not insignificant is just a fraction of it's total sales. For example Golf and variants roughly sell about 600,000 annually in Europe alone.

So my point about 250M being not exactly a sinker for VW still stands.


Modified by lonewolf at 7:26 PM 1-15-2004

"Not another brick in the wall... " - Pink Floyd