23 January 2008
Stefan Jacoby Speaks at Automotive News World Congress
Thank you very much. On November 5 of last year, a weekly automotive trade publication that I'm sure all of you are familiar with published an opinion piece about Volkswagen of America.
The core message was that we would not meet our one-million unit sales goal in the United States. A number of factors – exchange rates, quality, image, competition and our own attitude – would be our undoing.
The headline captured the skepticism of the article, with a uniquely American response..."Get Real."
It's an ironic turn of phrase, that doesn't easily translate to my native language. In Germany, I suppose we would say, "realistisch." So, let's get real.
Please allow me to position our Volkswagen group goals for the United States within the context of our global corporate objectives.
By 2018, all of the brands under the Volkswagen group umbrella — from Audi to Volkswagen, from Bugatti to Skoda, and Bentley, Commercial Vehicles, Lamborghini and SEAT — will together sell ten million vehicles per year, around the world. Two-thirds of these global sales, 6.6 million units, will proudly sport the VW logo.
Emerging markets like Russia, China, India & Brazil will play a key role in this growth. But the United States represents a critical element, as well. To be a player in the world market, VW needs to be a bigger thing here in this country.
Let's clarify the goal: 1 million vehicles in the U.S. by 2018.
That's 800,000 Volkswagens and 200,000 Audis.
Invite me back next year...to talk about Audi, because I'm here today to talk about the Volkswagen brand. So, Volkswagen will deliver on this goal by doing just what the headline says: getting real. By re-connecting with our customers. By re-igniting the passion that Americans associate with our vehicles. By re-committing ourselves to the highest levels of quality and service. And by reminding American drivers, of every age, how and why they fell in love with Volkswagen in the first place.
I am pleased to have the opportunity to outline our strategy for you today, to separate objectives from opinion and fact from folly… and to explain exactly how the Volkswagen brand will reach our 800,000 unit sales goal in America.
From Dr. Winterkorn's office in Wolfsburg, to my office, in every regional office and in every VW dealership in this country, we are committed to the U.S.
Volkswagen is here not just to stay, but to grow!
Our optimism is based on a very real business strategy that expands Volkswagen from a niche to a volume player here in the U.S. and reflects our global position as the World's Most Innovative High-Volume Brand.
Before I get into the nuts and bolts of our strategy, let me be clear: this is an ambitious goal, no doubt about it. And, as the writer of this article correctly points out exchange rates, and for that matter, a difficult economic environment, Increase our challenge.
But, that doesn't mean it's unattainable. It means we hunker down, and respond to skepticism the only way we know how: by delivering on our goals.
So, let me walk you through our strategy and all five of its core components, which I call the five pillars. These pillars address the critical points from the article, and provide the vision for our 800,000 unit goal.
First, obviously, are our products. There has been much discussion in all levels of our enterprise, about the needs and wants of American drivers. In the past four months I've come to better understand these. Everything in this country is big: the roads, the cars, the restaurant menus and the food portions. So for Volkswagen to be a bigger thing, we must offer a broader range of vehicles to meet the needs and wants of a diverse American customer universe.
The strategic product portfolio to deliver on our goals will consist of three components.
First, volume vehicles: a new compact sedan, a new mid-sized sedan and new cross-over utility vehicles.
Second, emotional vehicles like the GTI, Eos, Rabbit and New Beetle — maybe even our new small family of up!
And third, premium vehicles: our Touareg SUV, CC, our accessible new design statement, and maybe even a technical and environmental flagship that combines Phaeton luxury and TDI responsibility.
The expansion of our brand footprint starts today.
This year, we're launching an unprecedented portfolio of new models, including new entries, in new market segments for Volkswagen. A crossover utility vehicle, the Tiguan. This is the GTI of the cross-over utility segment. We think it will draw more men into a largely female category as well, and draw new people into our brand.
A new Minivan, very much in the American idiom, in a strategic partnership with Chrysler. It's a fun, cool space, with unique Volkswagen design aesthetics inside and out. Look for its handling to make you smile…after all, it's a Volkswagen! We'll reveal it in Chicago next month.
A stylish new coupe — the CC — that just happens to have four-door functionality. This car had its world debut last week at COBO Hall.
This car not only says luxury, but at a base price under $27,000, you'll agree it also says value. I'll always have a soft spot in my heart for the CC, as it represents my first world debut here in America.
And finally, our Jetta TDI Clean Diesel sedan and Sport-Wagen. Clean Diesel means big business for us. After all, we've sold 840,000 diesel passenger vehicles here since 1977.
Let's talk about the Clean Diesel upside for a moment. Our JD Power friends predict that diesels will comprise 8 percent of the passenger vehicle market by 2011. Over thirty percent of all Volkswagen sales, gas and diesel, come from California and the other seven states adopting tier 2 BIN 5 standards.
We know there's pent-up demand. Diesels have changed, and we're starting an S.C.C.A. racing series- for up & coming talent, the TDI Cup. With exceptional torque, smoothness and reliability, we think it will be good clean fun. Our Clean Diesels will be available for sale, not just lease, in all 50 states. Look for them this summer.
Our second pillar is brand positioning.
Research tells us that our U.S. customers are — and always have been — individual spirits. They carry a strong sense of me, within the context of a broader we. Our new campaign will position the brand to resonate and reconnect with American drivers — drivers who have a great deal of positive feeling and goodwill toward Volkswagen.
These are the people with fond memories of their original Beetle, or a favorite camping trip in a Microbus. They are people who remember a top-down drive in a Cabriolet on a scenic coast highway; people that commuted to work in a diesel Jetta enjoying over 40 miles per gallon. Or, those with goose-bumps as they experienced the corner hugging tenacity of the original pocket rocket, our GTI.
These memories and the friendly, open and accessible nature of the Volkswagen brand will help us re-establish our relevance to a broader group of American customers. It's not just baby boomer nostalgia. Remember, we currently enjoy one of the youngest average buyer ages in the industry.
How will we convey the message about a friendly and accessible brand of German engineering and innovation?
"Das Auto," literally — The Car.
The definitive car for the individual spirit. The car for the young, or young at heart. Das Auto for the driving enthusiast. Das Auto for the environmentally concerned.
We'll be launching this new campaign soon and when you see it, I think you'll agree it is the essence of our brand and our relationship with the American driver.
Of course, American consumers don't just purchase cars because of a brand campaign and cool new products. Their decision is based on quality. Specifically, we believe quality improvement and market share growth go hand in hand.
Quality, as measured and reported here in the US, is a top priority for the leadership of the Volkswagen Group, and it is my top priority.
About 18 months ago, we promised our dealers that the VW brand would reduce the number of IQS defects per vehicle, after 12 months in service by half from 2004 to 2008.
And we're making progress. We have achieved year-over-year improvements in quality three years running. Customer complaints per vehicle in this ownership time frame have dropped by 12 percent in 2005… 20 percent in 2006… and 15 percent in 2007.
We have also attacked IQS issues from both manufacturing and design perspectives. If a manufacturing defect surfaces, it is addressed immediately, with appropriate urgency.
It's the same on the design side, but takes a little more time. When IQS data showed that the cruise control stalk was difficult to intuitively operate it was re-designed and re-configured with American customer expectations in mind, for the very next model year.
IQS data showed that Rabbit & Jetta pedal spacing was tight for drivers with size 12 men's shoes. It was redesigned with increased spacing for the very next model year.
There's also a Volkswagen quality story beyond IQS. Every year Kelley Blue Book projects the retained value for every nameplate in each segment. An award is given for each model with the highest percentage of retained value, after 12 months.
For the highest projected retained value, Rabbit, Jetta and Eos topped their respective segments. In addition, Volkswagen brought home top honors for overall brand value retention — better even than our formidable American, Asian and European competitors.
We believe retained value is a reflection of Volkswagen quality and provides another win for our customer by lowering the total cost of ownership, with better payback before the cycle starts again.
A great retained brand value story is about to get much better when our Clean Diesels hit the market, too. That isn't to say we don't have more work ahead of us on the quality front. We do. But we're making real progress and I'm proud of the track we are on.
Onto the third pillar, our dealer network.
We're strengthening and supporting that network, focusing on size, structure and performance. I've just returned from our annual dealer meeting, where we presented our new product portfolio and our strategies for growth.
We reaffirmed to the dealers, our most important customers, our commitment to the United States and to their individual businesses. It's not about the number of dealers, it's about optimizing through-put from our existing network.
It's about more exclusive points. Stand alone VW stores regularly show the greatest profitability within our franchise. And finally, it's about listening to our United States dealer partners. Real communication, based on attentive listening, enables true collaboration.
Our fourth pillar is making our own organization more efficient and effective.
We will improve the way we do business, with new internal structures, new management systems, and new teams. We're strengthening and supporting our regional sales force. We're empowering field staff to make decisions that increase our customer satisfaction, and improve dealer profitability. It's a win-win-win — for our customers, for our dealers, and for the brand.
Our headquarters move to Herndon, Virginia will be more than a seamless transition. It signifies a new start for our company, and we look forward to opening our doors this Spring.
Finally, we're evaluating additional production capabilities here in the U.S. dollar region. That way, we can be more responsive in the marketplace and mitigate the effects of volatile currency exchange rates.
There's been a lot of speculation on this front, including the silly rumor that I've been traveling the Carolina countryside with a "bunch of Germans" purchasing land.
This is not true.
So...what's our plan?
We need to build the right vehicle, at the right price, in the right plant, within the right supplier corridor, at the right time. The right vehicles will be volume products for the brand. The right price will provide the value that American customers expect from Volkswagen and be profitable for us.
The right plant will have state of the art technology, and contain costs while providing quality. The right supplier corridor will reflect the phrase I've heard so often here in the United States: "Location, Location, Location," much like the three most important things in our business: "Product. Product. Product."
A decision on local production will come in the next six months. Stay tuned.
And, so that's our strategy.
It is aggressive, but realistic. Or "realistisch". It provides us a singular focus for the next 10 years.
When it's all said and done, the human element is what will bring this strategy to life. Building true cultural change begins in the hearts and minds of our people.
To inspire and lead this positive change, I've recruited a great new team. Mark Barnes joins me as Chief Operating Officer. He and his team serve as the dealer's operational partner and advocate. Mark has it all...import anddomestic experience; field, region and headquarters experience.
Toscan Bennett leads our product group, and is responsible for the avalanche of new vehicles that will deliver on our aggressive goals. Toscan's resume goes from PT Cruiser to Ferrari, and from the USA, to Europe, and back.
Tim Ellis will lead our efforts to "mine the gold" within the Volkswagen brand. His team, and our agency partners, will create messages to support Das Auto. Tim most recently headed Volvo's global marketing communications, and also brings diverse experience with brands like Ericsson Cellular, and Virgin airlines.
The article concludes with concern about our attitude.
My hope is that our corporate attitude, just like our brand, will always be original, honest, friendly, approachable, value-conscious, environmentally responsible, and above all, ladies and gentlemen — real!
Thank you very much for your time today.