Volkswagen studies U.S. version of Polo subcompact

Volkswagen Polo GTi

Volkswagen AG, Europe's biggest carmaker, may bring a subcompact car similar to its Polo to the U.S. as record gasoline prices spur sales of fuel-efficient vehicles.



Construction of an engine plant in North America, probably in Mexico, also is under study, Stefan Jacoby, chief executive officer of Volkswagen Group of America Inc., said yesterday in an interview.

Adding a new small car in the U.S. would help Volkswagen tap demand for compact models exemplified by a 31 percent jump in 2008's first six months, when the rest of the market shrank 10 percent. The Polo, sold chiefly in Europe, is similar in size to Toyota Motor Corp.'s Yaris or Honda Motor Co.'s Fit.

``We are considering bringing these cars here,'' said Jacoby, 50. ``It's too early to give a timeline for when.''

Volkswagen, based in Wolfsburg, Germany, didn't immediately provide fuel-economy figures for the Polo. A U.S. version probably would come after a future redesign of the current model, spokesman Steve Keyes said after the Jacoby interview.

The Yaris is rated at 32 miles (51 kilometers) per gallon in combined city-highway driving, while the Fit is listed at 31 mpg, according to the U.S. Environmental Protection Agency's fuel-economy Web site. Gasoline reached a high of $4.11 a gallon on July 15, according to motoring group AAA.

Jacoby said a successor to the Jetta will reach the U.S. in 2010, to be followed by a new mid-sized sedan in 2011 that will be built at the Chattanooga, Tennessee, factory Volkswagen announced this week. That car will succeed the Passat and will have a new name, he said.

2018 Goal

Volkswagen is working toward a goal of 800,000 U.S. sales of its namesake brand by 2018, more than triple 2007's total of 230,571. Sales in the region rose 0.6 percent this year through June, according to industry-analysis firm Autodata Corp. in Woodcliff Lake, New Jersey.

A new engine plant in Mexico would be Volkswagen's third in North America after Chattanooga and a Puebla, Mexico, factory that makes the Jetta and New Beetle.

``We have not made up our mind, but we will make a decision soon,'' Jacoby said of a new facility in Mexico. Volkswagen is considering such a plant to make its next-generation, low- pollution engines, he said.

The Tennessee factory will cost almost $1 billion and employ 2,000 people when it opens in 2011. It is Volkswagen's first in North America since closing its Westmoreland County, Pennsylvania, plant in 1988. Volkswagen may also need local suppliers for fuel-saving dual-clutch transmissions that will become available on more of its U.S. vehicles, Jacoby said.

More Consistency

Jacoby said the Tennessee plant will help Volkswagen become more consistent in the U.S., where its best sales year was 569,182 vehicles in 1970. Production delays and poor quality sent that figure tumbling to 49,553 in 1993, threatening Volkswagen's existence in the world's largest auto market.

``Their execution has been very inconsistent,'' said John Casesa, an automotive-industry consultant with Casesa Shapiro Advisors in New York. ``But the brand continues to have very strong appeal.''

Volkswagen hasn't made a profit in North America since 2002, the last year the euro was valued at par or below the dollar. A strong euro makes it more expensive to build cars in Germany and sell them in the U.S. The euro reached a record July 14 at $1.6038.

All future high-volume vehicles for sale in North America will be made there to avoid foreign-exchange shifts, Jacoby said.

With the help of U.S.-based manufacturing, Volkswagen will try to lower prices to compete with Toyota, Honda and General Motors Corp., Jacoby said.

[Source : Bloomberg]