Volkswagen's American assembly plant: fahrvergnugen was not enough - international marketing

Business Horizons, Nov-Dec, 1992 by William Beaver

By 1982 the Rabbit was passe. The vehicle had been available in America for seven years, in a market in which product cycles were shrinking, not expanding. Moreover, Volkswagen's competitive advantage had evaporated; both the Japanese and the Big Three were producing "Rabbit"-type cars with lower sticker prices. Something new and more stylish was needed to attract customers, a car that would utilize Volkswagen's core strengths of handling, accleration, and braking--its fahrvergnugen--blended with characteristics that appealed to American consumers. Instead, under the leadership of Carl Hahn, Volkswagen would produce a "German car" for the American market. "We must return to the days of the Beetle philosophy," stated Hahn (Thureau 1982). Hahn's support of the Beetle philosophy was understandable. He had been a protege of Heinz Nordhoff but had left Volkswagen during the Leiding era. Hahn's strategy would emphasize German engineering and quality and, of course, an evolutionary approach to design changes along with cars that were fun to drive--the traits Hahn felt gave Volkswagen a competitive advantage. The problem with this approach, besides shrinking product cycles, was that it was no longer apparent to American car buyers that German engineering and quality were superior, or even a match for the Japanese.

The continuation of the Beetle philosophy, at least in a modified sense, was borne out with the appearance of the new Golf. It was a car that was internally new and much improved with plenty of fabrvergnugen, but it still resembled the old Rabbit in exterior styling. In November 1984, after spending $200 million to retool, Westmoreland began to assemble the Golf. Interestingly, the name "Rabbit" had been dropped to emphasize the car's German heritage, and as much as possible, the American-built Golf was a replica of the car manufactured in Germany. The new Golf sold well in Europe and hopes ran high that the car would rejuvenate the American market, but sales were sparse. American consumers viewed the car as just another Rabbit. In Europe exterior design is less important than performance, but in America car buyers now wanted styling even in subcompacts. Perhaps one Honda official put it best when he stated, "Volkswagen's customers left them behind" (Cieply 1984). In fact, a more stylish design rather than an econobox would have enhanced the image Volkswagen wanted to foster. For instance, the company marketed the Golf as a sporty vehicle for the young professional who could not afford a BMW. To American drivers a sporty, performance-oriented econobox seemed like a contradiction in terms.

With the failure of the Golf to generate increased sales, the outlook for the Westmoreland plant seemed bleak. Nevertheless, Carl Hahn predicted that Westmoreland would turn itself around, but without the right products the red ink continued to mount. (By 1985, best estimates placed the figure at $1 billion). Westmoreland was becoming the weak link in VW's global chain, whereas Europe had emerged as the bright spot in the company's operations.