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September U.S. Sales Decline Heralds Stormy 2007, Hallmark Warns

VW hopes aggressive pricing and a new Beetle marketing campaign will help it maintain momentum heading into 2008.

PARIS – Volkswagen U.S. sales dipped in September, ending its streak of consecutive monthly increases at 10 and marking the pending arrival of a “perfect storm” in 2007, warns the brand’s top North American executive.

But the gathering clouds have a silver lining, partly formed by a concept expected to revive the Scirocco badge – the Iroc sports coupe.

“2007 is going to be ‘the perfect storm’ for us,” says Adrian Hallmark, executive vice-president, Volkswagen North America Inc.

“Just as we’ve got TDI (diesel engine sales) really going and fuel prices are getting people to buy more efficient cars, we have this thing called particulate filter requirements,” Hallmark tells Ward’s at the Paris auto show.

Tougher federal emissions standards that take effect for the ’07 model year have forced VW, the most successful seller of diesel-powered passenger vehicles in the U.S., to retreat until model-year ’08.

“That’s 35,000 cars,” Hallmark notes.

The storm’s intensity increases with the dearth of new product for 2007. After an aggressive rollout of new offerings in 2006, highlighted by the redesigned Jetta C-car, VW takes an ill-timed breather next year.

The only introductions on tap are the Jetta wagon, Golf-based R32 and a face-lifted Touareg cross/utility vehicle, all of which are relatively low-volume lines. And they are not expected in U.S. showrooms until the second half of the year.

To offset the expected shortfall generated by the diesel supply disruption, VW has “repositioned” the Jetta by lowering its ’07 starting price to $16,490 from $17,900. Factor in the slowly growing sales momentum behind the redesigned Passat D-car, the availability of carry-over ’06-model diesels, the impact of the Rabbit’s return and the U.S. showroom arrival of the all-new Eos coupe-convertible and “we should, roughly, be able to cover the gap,” Hallmark says.

As an insurance marker, he adds, “We’re going to push Beetles.”

The auto maker has spent precious little on marketing its iconic small car. But that will change next year as Hallmark promises a campaign “very much in the GTI mood.”

Introduction of the fifth-generation Golf derivative last year was marked by an edgy series of tongue-in-cheek TV ads featuring a mischievous duo of stereotypical German clubbers, Wolfgang and Helga.

Hallmark also acknowledges plans for a special-edition “Triple-White” Beetle featuring a white exterior, interior and ragtop.

“We’re moving in the right direction,” he says. “But the next 12 months are going to be critical.”

VW’s aggressive launch schedule resumes in 2008 with a Chrysler Group-built minivan and a Golf-based CUV called the Tiguan.

The auto maker has said its minivan will be distinct from Chrysler’s products, even though they will share a platform. Hallmark says VW still is undecided on the prospect of offering a diesel powertrain.

And despite guffaws from the media and some dealers, Tiguan will “quite probably” keep its curious name – a blend of Tiger and Iguana.

“People still struggle with Passat,” he notes. “But whatever you do, you’re wrong. There’s so many names already taken in the world. When you find something that you think is the ideal name, you can pretty much guarantee, in one market somewhere around the world, you can’t use it.”

VW offers a deeper look into its crystal ball here by displaying the Iroc, a 4-seat hatchback powered by a 210-hp TSI mill boosted by a turbocharger and a supercharger. The auto maker does not confirm whispers the Iroc will form the basis of the new Scirocco, a production program promised to its plant in Setubal, Portugal.

But Hallmark is not content to wait. He, like VW Brand Group Chairman Wolfgang Bernhard, wants to continue building toward profitability.

“We want to turn this around,” he says. “My mission and the team’s challenge is to, by 2009, make the business whole in North America.”

And of the notoriously demanding Bernhard, Hallmark is effusive in his praise.

“It’s like somebody pushing you in the back with a rifle every day, on the one hand. But when he removes the pressure, he then runs in front of you and pushes everybody else out of your way. Then he comes back to push you again.”

VW also uses the auto show to debut the face-lifted Touareg and, for outside North America, a similarly revised Touran minivan and an all-new front-wheel-drive CUV called the CrossGolf. The latter, based on the Golf Plus, launches next month in Europe and features a choice of four powertrains – two gasoline and two diesel – along with electronic stability control, 17-in. wheels and folding tables on the backs of the front seats.

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