Wednesday, December 07, 2005

Volkswagen's Future Product Blueprint

Text from AutoWeek.
MUNICH, Germany -- Volkswagen brand Chairman Wolfgang Bernhard has borrowed from his days at the Chrysler group to create a future product blueprint for VW.

Internally, the plan is called "Hut" -- a German word that means hat. It refers to VW's initiative to place a unique exterior, or hat, over vehicles that share underpinnings.

The strategy is "to offer different models with a single change of the sides and roof parts, without changing platforms," Emilio Saenz, managing director of VW's Autoeuropa assembly plant in Portugal, told Automotive News Europe, a sister publication to Automotive News.

Autoeuropa is a leading candidate to produce VW's niche vehicles, sources say.

In the next three years, VW will launch as many as 10 vehicles that either will be based on derivatives of current cars or will be niche models.

Crossing over

The first vehicles using the Hut plan will be "Cross" versions of current models that will offer distinct styling and unique engines but similar underpinnings as mainstream models. The first example, a Cross Polo, will be unveiled at the Geneva auto show in February, followed by the Cross Golf Plus in July and Cross Fox later next year. All Cross versions will have styling that is different from mainstream models and meant to attract younger buyers.

Among planned niche vehicles are a Golf-based coupe called the Scirocco, due in 2008, and a four-door coupe-style vehicle based on the Passat that will be similar to the Mercedes-Benz CLS. The Passat coupe should be in showrooms by 2009.

Bernhard expects these benefits from the Hut strategy:

>> VW will no longer rely so heavily on core vehicles such as the Golf and Polo.

>> The carmaker can expand its lineup while keeping costs under control.

Bernhard took charge of the VW brand on May 1. He quickly realized that one of the automaker's most pressing problems in the next three years will be a lack of new high-volume models. "We have the wind in our face, and we will get no help from volume launches," Bernhard said during an analyst call in July.

VW launched its fifth-generation Golf in fall 2003. The sixth-generation Passat went on sale last March, and the fifth-generation Jetta went on sale in June.

Chrysler's way

"For the next two to three years, our strategy must be to reduce cost to survive and to finance the next product offensive," Bernhard said at the launch of the Eos coupe cabriolet at the Frankfurt auto show in September. "It's very similar to the situation at Chrysler."

During 2002 and 2003, Bernhard helped start a so-called "top hat" approach at Chrysler, where he was COO. The strategy was to develop derivatives such as the Chrysler 300 sedan (sold as the Chrysler 300C in Europe) and Dodge Charger sedan, two vehicles based on common platforms and parts but with completely different rooflines.

At VW, Bernhard wants to cut 7 billion euros, or $8.25 billion at current exchange rates, in development costs by 2010 by using common parts among several different vehicles and producing multiple models on flexible assembly lines.

But not everyone is convinced the strategy will work or that Bernhard's cost-cutting plan represents a significant savings.

Adam Jonas, a European analyst at Morgan Stanley in London, warns that platform sharing without significant differentiation could be a problem for VW.

"The strategy has to be done carefully," Jonas says. "The markets are too competitive to chance delivering a shell of a car without significant innovations. Buyers are wise enough and savvy enough to know there are not significant changes."

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