Update: A statement by VW's U.S. spokesman, Steve Keyes, indicates the Golf Mark VI, or Rabbit as it's known in the U.S., will be arriving for sale as scheduled. The previous report of the Mark VI's delay was based on sources believed to be close to Martin Winterkorn, chairman of the VW Group.
The new model's sales figures are already in VW's American financial estimates, according to the latest news, from an exchange between Keyes and Inside Line. Keyes did not comment on the financial reasoning allegedly behind the decision to pull the Mark VI Golf from U.S. sales, nor on the similar move taken to keep the Scirocco out of America. The falling dollar and rising industry costs are behind that decision, and had been credited with the Mark VI's U.S. sales delay as well. What, if anything, has changed, it unknown.
Original: The United States' economic problems, which some economists are starting to call a recession, are affecting carmakers both within and outside the country alike. In March Volkswagen announced it would not import the new Scirocco hatchback to the U.S. because of profitability problems due to the weak economy. Now, latest reports indicate the updated Mark IV Golf could also be kept from U.S. buyers for the same reason.
A report in Germany's Spiegel Online says VW boss Martin Winterkorn is delaying introduction of the new VW hatch in the U.S. and Brazil as a result of tight margins and poor import conditions in those markets. This isn't the first time such a move has been made by VW. The U.S. soldiered on with the Mark IV Golf for some time after the European update to the Mark V platform. Ford has been selling a cheaper version of its Focus in the U.S., and until lately GM had as well with its European models.
The margin for the decision is remarkably thin, but in volume sales, even small variations in profit or loss can make all the difference. The current exchange rate, import costs and market conditions would give the new Golf a profit ratio of just 3.4% in America. Winterkorn says U.S. sales just can't be justified with less than 5% profit, and so the Golf will remain forbidden fruit until the dollar situation changes.
How the move will impact VW's stated goal of catching Toyota, the world's highest-volume carmaker, in 10 years is unclear, but keeping one of its best-selling models out of one of the world's premier car markets certainly can't help. The new Mark VI Golf is expected to make its world debut at the Paris Motor Show in November.
2009 Volkswagen Golf family
Reader Comments
Mon Jun 16 2008 2:04 AM
NoNameDenton says
Well, since VW is going to build a plant in the USA (either in Tennessee or Alabama), why not build it here so the next gen can be launched or time, or would that make too much sense.
Mon Jun 16 2008 3:36 AM
Si400 says
That makes far too much sense.
Mon Jun 16 2008 7:06 AM
chris says
the golf is already made in mexico there gents. it's an incredibly complex car, and those profit margins consider production in mexico.
That's just how bad the economy is. and they can't justify raising the prices on the car either. everyone's doing it... the economy here just sucks. plain and simple. i think americans need to start understanding that they live in a second class economy. a lot of countries around the world have had to deal with older product offerings because the economics of selling the newer generation vehicles never made sense. funny that this is now happening in the states.. and its not just the american brands that are screwing you.
Mon Jun 16 2008 7:40 AM
Renton says
Americans living in a second class economy? Dude that is funny.
While there is a problem with the dollar at this moment, do not expect it to remain there forever. The US is far too important a player
Many companies lose money selling product here these days and they can make it up on the economy of scale. BMW, e.g., are so much cheaper here than they are in Germany, but they now they can not afford to NOT sell cars here.
VW is in desperate need of new product, yet they always come up with a reason why they can't. People are not flocking to their showrooms. They are foolish not follow BMW's strategy.
Mon Jun 16 2008 9:54 AM
Tod says
The US is not in a true recession yet, true recession is continues negative GDP growth which we have not seen yet. Our unemployment rate is still one of the lowest in the industrial world and our taxes are also low. Gas in the US is much cheaper then in other industrial countries. Sure our dollar took a hit but this is temporary because we are at war and are spending billions on Iraq and Afghanistan.
Mon Jun 16 2008 9:04 PM
chris says
well.. lets put it this way.. theres a great deal of unrest about the insecurity of the USD. it started slipping, and people invested more into oil futures. because of that, comodity prices went up in the USA, and the dollar slipped further. because of this ebb and flow in the USA... other markets have suffered. the price of oil is now un-naturally inflated because of a credit crisis in the states, and a weakened economy. there have been high level meetings between nations to discuss moving oil futures trade to a more stable market, such as the LSE. IF that ever happens, you can expect a lot of other items to move there. paternoster square will replace wall street as the financial center of the world,.. and all of a sudden, the american economy will be at the mercy of the EU's economy, much like the rest of the world is paying for a flux in the american economy.
needless to say, oil is going to be expensive for the long term, and it may never really dip any appreciable ammount. the profit margins in an economy on the whole are 5% at best,.. and you talk about a 500% increase in the price of oil in the last 3 or 4 years... and anything that ever needs to be delivered in the physical world becomes more expensive.. that profit margin starts to shrink reaaallll quick.
Tue Jun 17 2008 1:32 AM
NoNameDenton says
Recession never happens till the public loses faith in the economy.
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