VW goes on offensive in crisis pushback, expanding SUV and E-car line

Volkswagen is going on the offensive in North America, challenging the likes of General Motors and Ford with a wave of new sport utility vehicles and battery-powered cars.

VW’s namesake marque will expand its range of SUVs and sedans and start making electric autos in North America in 2021 in a bid to “evolve from a niche supplier” into a successful mainstream carmaker in the region, the company said on Tuesday.

“We will be significantly stepping up our activities in the USA,” VW brand chief Herbert Diess said. “Our goals are high and our strategy is very ambitious.”

Even before the diesel scandal, Volkswagen struggled to extend its dominance in Europe and China to the U.S., misreading American tastes for large, affordable cars. VW’s rollout of SUVs that appeal to American consumers came late and the company was slow to follow up a bigger, cheaper version of the Passat sedan with other models.

The VW brand’s market share in the U.S. is less than 2 percent compared with about 14 percent for Toyota and 17 percent for General Motors, according to Bloomberg Intelligence data.

The North American push is part of a sweeping overhaul to improve the group’s operating margin, increase sales of electric cars and create a new mobility division that focuses on ride-sharing and self-driving technologies. Expenses for new initiatives are growing, even as the company faces at least 18.2 billion euros in fines and repairs tied to the diesel scandal.

To help cover those costs, VW’s main brand reached a landmark agreement with workers last week, to cut as many as 30,000 jobs worldwide and slash 3.7 billion euros of costs. The division aims to more than triple its profit margin to 6 percent by 2025 and sell 1 million battery-powered cars globally per year by then. The annual investment budget will remain stable at about 4.5 billion euros, and its electric-car transition will be funded in part by cutting more than 2.5 billion euros of costs by scrapping underperforming conventional models.

Volkswagen shares rose 0.6 percent to 120.85 euros at 12:20 a.m. in Frankfurt trading, bringing the loss since the emissions cheating was revealed in September of last year to about 25 percent.

VW’s main marque, which accounts for nearly half of the group’s sales, was already struggling with bloated production costs and convoluted management before the diesel scandal came to light. Burdened by its free-spending past, productivity at VW is 30 percent below its peers and the carmaker spent 60 percent more per vehicle than Toyota Motor Corp. over the past three years, Exane BNP Paribas estimates.

North American production of electric cars will start in 2021. VW currently assembles the Jetta sedan, the Golf hatchback and the Beetle in a factory in Puebla, Mexico. Its only factory in the U.S. is in Chattanooga, Tennessee. Globally, Volkswagen plans to sell as many as 3 million electric vehicles per year across all its divisions.

“Over the next few years, Volkswagen will change radically. Very few things will stay as they are,” Diess said. “The electric car will become the strategic core of the VW brand.”