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Michael Price cleans a Cadillac CTS-V coupe race car before its debut for press days at the North American International Auto show in Detroit, Michigan January 8, 2011. (Rebecca Cook/Reuters/Rebecca Cook/Reuters)
Michael Price cleans a Cadillac CTS-V coupe race car before its debut for press days at the North American International Auto show in Detroit, Michigan January 8, 2011. (Rebecca Cook/Reuters/Rebecca Cook/Reuters)

Race on in rebounding auto industry Add to ...

Small cars and hybrids will dominate the North American International Auto Show on Monday in another chapter of the greening of Detroit, but a traditional, mid-sized sedan from Volkswagen AG could be the most important vehicle being introduced in the Motor City.

As the price of gas in the United States stays stubbornly above $3 (U.S.) a gallon, General Motors Co. will show off a new Buick compact and Chevrolet subcompact, Honda Motor Co. Ltd. will unveil a redesign of its compact Civic, and Toyota Motor Corp. will take the wraps off new vehicles that widen the breadth of its Prius hybrids.

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After two years of woeful sales and a massive restructuring that transformed the Detroit Three, the industry appears to be on the rebound, based on buoyant December sales, third-quarter profits at GM and Ford Motor Co. and an improving U.S. economy.

As always, however, the already ferocious competition in the North American market will be increased as auto makers re-enter segments they abandoned - such as Ford with its C-Max minivan - or offer redesigned or new vehicles to try to grab market share.

Count Volkswagen as an auto maker determined to grab market share with a new vehicle.

Its new mid-sized car, which will retain the Passat brand name, comes out of a $1-billion plant the Germany-based auto maker has built in Chattanooga, Tenn., as the spearhead of its goal to sell one million vehicles in North America by 2018.

That sales target, in turn, is a key piece of the company's other bold objective - to overtake Toyota as the world's largest auto maker by that same year.

"For Volkswagen to beat Toyota on a global basis, they need a much bigger footprint in North America," said industry analyst Bill Pochiluk, president of consulting firm AutomotiveCompass LLC.

Volkswagen and its luxury Audi brand sold 358,459 vehicles in the U.S. last year and both divisions hit record numbers in Canada.

That's a far cry from market leaders GM and Ford or even the target Toyota, which sold about 1.8 million vehicles in the U.S. market last year.

But the new mid-sized car gives it a U.S.-built entry in the largest passenger car segment in that market - and the second biggest car segment in Canada - which also happens to be the most hotly contested.

"To significantly grow the business in North America you need more local production," said John White, president of Volkswagen Canada. "Clearly it's more profitable to sell vehicles in North America if they're made here and it gives you more pricing flexibility."

Mr. White sees the new mid-sized becoming one of four core vehicles for Volkswagen Canada, joining the Jetta compact, the Golf family of cars and the Tiguan crossover utility vehicle.

It's also a key part of his plan to boost sales in Canada to 55,000 annually in 2012, up from 45,388 in 2010.

The car, which he described as being longer, wider and roomier than the existing Passat, Volkswagen's current mid-sized entry, will be offered with a diesel version. It will be the only car in the segment with a diesel, which has been an area of strength for the company in Canada.

The Chattanooga plant will start out at a production rate of 150,000 vehicles annually, but industry sources said that number will rise significantly by the middle of the decade and they believe Volkswagen will shift Tiguan production to that plant from Europe or develop a mid-sized crossover.

One difficulty Volkswagen could have in reaching its sales target of one million vehicles in North America by 2018 is that it lacks a consistent image, said Christoph Stuermer, an auto industry analyst with HIS Global Insight in Frankfurt, Germany.

It's well known as the maker of the quirky Beetle, which gave Volkswagen a boost when the New Beetle was redesigned in the late 1990s.

But Volkswagen didn't take advantage of that boost, Mr. Stuermer said. A convertible version of the car took too long to arrive and didn't keep refreshing he brand, the way BMW AG did with the Mini.

"There's a lot you can learn from Mini in terms of keeping a product fresh," he said.

Mr. White said when the New Beetle arrived Canadians were buying 8,000 to 10,000 of them a year.

Last year, that fell to about 1,200, including the convertible model.

Follow on Twitter: @gregkeenanglobe

 

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