August 13, 2009 at 1:00 am

U.S. Volkswagen chief Stefan Jacoby talks strategy

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Stefan Jacoby, president and CEO of Volkswagen of America, is steering the German brand's U.S. operations at a busy time. VW is investing $4 billion to build an assembly plant in Chattanooga, Tenn., and develop at least two new models for Americans.

In addition to new compact and midsize cars that VW has said it would produce, the automaker is mulling models for other segments, Jacoby said.

He sat down with The Detroit News to discuss VW's plans.

Q . VW was once the No. 1 import brand, and consumers still rate its cars highly, yet Kia outsells VW. Why is it struggling?

A . I came here in September of 2007, and I was surprised how much the brand Volkswagen is loved in the United States, how much awareness there is of the brand.

But this brand got a little bit lost. It was too much positioned in the corners, in the niches of this big market. I would say it was our mistake in our strategy.

Q . One of the new models Volkswagen is developing for American car buyers is a midsize car. Why is the Passat stuck in the margins of its segment?

A . The Passat is a European midsize sedan, and it fits in the competitive set in the European market. But for this market, the vehicle is too small, and it is almost knocking at the doors of the premium segment. That's not where the volume is. What we need to do is improve our competitiveness in pricing.

Q . The new midsize car will be produced in Tennessee, and a new compact will be made in Mexico. Will there be any more additions to the U.S. lineup?

A . There's an ongoing discussion whether we should have a vehicle below the Jetta, a kind of entry model into the VW brand. That could be a Polo, or a car in the range of a Polo. (The Polo is a subcompact that VW sells in Europe and other regions.)

We are looking at the truck segment as well. The Tiguan (compact SUV) has been very well received, but it's imported out of Europe so we can't realize the volumes that we could get out of that segment. So we are investigating a second product for Chattanooga, either a compact SUV or another SUV model.

Above the midsize new sedan, we'll have another product, like the Avalon for Toyota.

That's our strategy, to have a lineup ending with the Phaeton (luxury sedan). We will bring the Phaeton back to the market.

Q . Do you have any plans to develop crossovers?

A . We are thinking about crossovers (but) I don't want to follow every crossover trend in this market. One strength of the brand VW is the long-lasting and attractive design.

Q . I see Volkswagen's U.S. market share is up a tick. How are you managing in this awful downturn?

A . The crisis is somehow helping us. We see there is higher demand for our vehicles because the mindset of the customer is changing toward more economic and safe vehicles.

Q . Do you see other indicators that VW is making headway with American consumers?

A . When I arrived here, our loyalty rate was under 30 percent. In the first quarter of 2009, the loyalty rate was around 40 percent. This is a significant improvement.

Q . Volkswagen has been dogged in its efforts to win Americans over to fuel-efficient diesel technology. Are you considering other technologies for the U.S.?

A . For the new midsize sedan, we will offer diesel technology, and we also plan a hybrid version.

If you look at the long term, we believe we'll have battery-powered electric vehicles as the ultimate answer.

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