DETROIT -- Adrian Hallmark, boss of the Volkswagen brand in America, thought he had worked out a deal with VW product chief Wolfgang Bernhard to expand the U.S. product lineup.
Hallmark figured he could add a couple of nameplates, fix VW's pricing problems and compete on even terms with the Japanese.
Now it's back to the drawing board. Bernhard is gone, the victim of an internal corporate power struggle. And Hallmark must sell his plan all over again to Volkswagen AG's new chief, Martin Winterkorn.
Ever since he was named executive vice president of VWoA in 2005, Hallmark has been trying to jump-start stagnant U.S. sales. Here's how he wants to do it:
- Change pricing and reposition the Rabbit, Jetta, New Beetle, Passat and Eos.
- Add a subcompact below $15,000.
- Add a Passat coupe priced higher than the sedan.
- Field a truck lineup consisting of a repriced Touareg SUV, the smaller Tiguan crossover and a Chrysler group minivan.
Winterkorn must support Hallmark's plan. Winterkorn is an ally of Ferdinand Piech, VW's combative former CEO, who still heads VW's supervisory board and represents the dominant shareholders.
Piech retired in 2002 but kept his board seat. He repeatedly clashed with his successor, Bernd Pischetsrieder, who earned the enmity of VW union leaders when he rammed through a turnaround plan that cut thousands of jobs.
With the union's backing, Piech lined up enough board support to force Pischetsrieder to step down Dec. 31.
Former Audi chief Winterkorn then replaced him. Last week, Piech underlined his triumph by touring the Detroit auto show with Winterkorn in tow.
Repitching the plan
Now Hallmark must woo his new masters, and he thinks he has the right product plan to do so. "All of these projects are economically viable and proven," he says. "I have a lot riding on the strategy."
Hallmark says he described the plan to Winterkorn in a 20-minute presentation. Now Hallmark says he must fire up his PowerPoint again to make a formal proposal.
Aside from adding models, Hallmark also wants to fix VW's faulty pricing strategy. Too many cars are priced substantially above others in their segment. The price ranges of those vehicles also sometimes overlap those of other VW models.
For instance, the Jetta compact competes with the smaller Toyota Corolla, the larger Camry and even the BMW 3 series. Although its base price starts at $17,120, including shipping, the Jetta sells for as much as $30,000.
Thus, its range extends well above the $23,590 base price of the mid-sized Passat.
To solve that problem, Hallmark wants to replace either the Jetta or Passat in 2010.
Until those models are redesigned, VW can attack the problem only by dumping unpopular trim levels. This year, VW killed the most expensive Jettas and the cheapest Passats.
Fewer Passats
VW will sell fewer Passats, but Hallmark says he will make more money on the improved product mix. "Now there is no debate," he says. "Passat is an entry luxury product."
With his proposed lineup, Hallmark thinks the VW division's annual U.S. sales can rise as high as 300,000 to 500,000 units, up from 235,140 last year.
With that volume, Hallmark says, VW could add premium cars like the ill-fated Phaeton, which has been pulled from the United States.
But aspects of the plan are problematic. For example, VW will have trouble marketing a subcompact for less than $15,000 because of international currency fluctuations.
Importing a subcompact from Europe would be costly, and the current Polo subcompact sold in Europe cannot be built in VW's assembly plant in Puebla, Mexico.
