published Sunday, January 8th, 2012

VW's Chattanooga-made Passat one of three finalists for North American Car of the Year

Volkswagen workers build Passats at the Chattanooga manufacturing plant.
Volkswagen workers build Passats at the Chattanooga manufacturing plant.
Photo by John Rawlston.
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VW SALES


U.S. snapshot by model in 2011 and percent change from 2010:

• Golf/GTI - 34,706, up 22.7 percent

• Jetta - 177,360, up 43.9 percent

• Beetle - 6,468, down 60.9 percent

• Eos - 7,533, up 12.6 percent

• Passat - 22,835, up 82.7 percent

• CC - 29,502, up 5.4 percent

• Tiguan - 25,990, up 24.1 percent

• Touareg - 7,535, up 59.9 percent

• Routan - 12,473, down 21.9 percent

• Total - 324,402, up 26.3 percent

Source: Volkswagen of America

Gary Silberg of tax giant KPMG was sitting beside Volkswagen of America chief Jonathan Browning recently and was struck by the seriousness of the automaker's effort to gain U.S. market share.

"It's one thing to say it, but when you look at it in their eyes, you can see the passion, the energy," said KPMG's national automotive industry leader.

This week at the North American International Auto Show in Detroit, the German carmaker hopes it can follow up last year's unveiling of its Chattanooga-made Passat with more exciting news.

The Passat, a car designed for and produced in America by VW for the first time, is one of three finalists for North American Car of the Year.

Picked by a jury of 50 automotive journalists, the winner will be announced Monday. The Passat is vying against the Ford Focus and Hyundai Elantra.

Michelle Krebs, senior auto analyst for Edmunds.com, said capturing the award helps draw the attention of car enthusiasts and potential buyers.

Krebs, who said she's a juror, added that the panel is representative of the full breadth of American car buyers.

"They're men and women from all over the country, all with different tastes," she said.

Late last year, the Passat received Motor Trend magazine's Car of the Year Award.

Jesse Toprak, TrueCar.com's vice president of industry trends and insights, said that such endorsements help boost sales and position Passat among the top new vehicles.

However, it's debatable how much awards drive sales, he said.

"Whether it makes a remarkable difference in the consideration of consumers, it's hard to say," Toprak said.

Browning said last week that Passat sales so far are "good" as it sold 6,884 units last month to reach the 22,777 mark since hitting dealers in August.

"We're seeing strong inventory turn rates for the gas and the diesel," he said.

Browning said sales for the diesel-powered versions are so strong that the automaker is seeing "a breakthrough" and "over-achievement" with the model.

While some diesel Passat models are in short supply at dealerships, he said that's normal with a new-car ramp-up.

"It takes awhile to get supply and demand in balance," Browning said. "We see it as a positive development that the customer is reacting extremely well."

MACH 18

Silberg said he doesn't know if VW will hit its target of tripling U.S. sales and selling 1 million vehicles by 2018, which VW has dubbed Mach 18.

"But I'm a big believer they've got the ability to continue to grow their market share in the U.S. for sure," he said.

Silberg noted that VW is considering building an Audi production plant in the United States to meet its growing demand. Local boosters are pitching a site next to the new $1 billion VW factory at the Enterprise South industrial park.

A new KPMG survey of 200 auto executives worldwide picked VW as the car company most expected to gain market share globally this year.

Silberg said 70 percent of executives chose VW as the expected No. 1 gainer. It's the second consecutive year in which the German carmaker was projected to hit the top spot, he said.

"It's quite impressive," Silberg said, noting that "the data is starting to show that."

In the U.S., VW and sister brand Audi only have a little more than 3 percent market share, so there is plenty of room to grow.

While the Chattanooga plant was built to produce 150,000 vehicles a year, factory officials have said it can be expanded to produce up to 500,000.

In addition to the Passat, a new crossover and other models have been mentioned as a possible second car for production at the plant.

VW officials have said they could make a decision soon on whether to build an Audi plant in North America to meet growing demand.

Hans Flick, also of KPMG, said while there are plant overcapacity issues in general in the auto industry in Asia and Europe, it's less so in the U.S.

He said non-U.S. companies, such as VW, want to be in the U.S. and see a pent-up demand.

"It may also support Volks-wagen having a successful investment in the U.S.," Flick said.

He said VW has arrived in the U.S. with "a big splash" with the Chattanooga factory and a major presence at last year's auto show.

"It was a classy event," Flick said. "It was well done and conveyed its true commitment to the U.S. marketplace."

That being said, KPMG's survey showed that the Detroit Three automakers also are expected to grow their market shares.

"The perception of the Detroit Three is that they're coming on pretty strong," Silberg said. "They're more competitive."

Also at the auto show, VW is expected to debut a hybrid Jetta that could go on sale in November, according to the Detroit Free Press. In addition, the automaker also may unveil a "pure concept" electric car, press reports said.

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about Mike Pare...

Mike Pare, the deputy Business editor at the Chattanooga Times Free Press, has worked at the paper for 27 years. In addition to editing, Mike also writes Business stories and covers Volkswagen, economic development and manufacturing in Chattanooga and the surrounding area. In the past he also has covered higher education. Mike, a native of Fort Lauderdale, Fla., received a bachelor’s degree in communications from Florida Atlantic University. he worked at the Rome News-Tribune before ...

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