Beetlemania To The Rescue

VW hopes its new Bug will revive the brand in the U.S.

Robert Case has had the Bug bug for a long time. The retired school principal has owned 15 vintage Volkswagen Beetles over the years, including the 1953 and 1961 models currently in his garage in Farmington Hills, Mich. "This was a utilitarian, reliable, economical car," he says. "Whether you thought they were cute or ugly, the beauty of the Beetle was within."

Now, nearly 20 years after the last Bug rolled out of a U.S. showroom, the Beetle is back. The 1998 New Beetle went into production at VW's Puebla (Mexico) plant in December, and VW is scheduled to unveil it at the North American International Auto Show in Detroit on Jan. 5. It will begin shipping Bugs to dealers in March.

Can Beetlemania reverse VW's slide in the U.S.? The German carmaker's U.S. sales went into a downward spiral after production of the original Beetle was halted 20 years ago. From its peak of 569,000 vehicle sales in 1970, when it accounted for 46% of all imports sold in the U.S., VW bottomed out at 49,000 cars sold in the U.S. in 1993. Industry analysts questioned what future--if any--the carmaker had in the U.S. Sales topped 135,000 in 1997, but VW's U.S. market share is still barely 1%.

The company hopes that sales of the New Beetle, along with redesigned Passat and Jetta models, will take it back to prosperity. VW will build 100,000 New Beetles in Mexico in 1998, half of which are targeted for the U.S. market. Longer term, the company may even follow the lead of BMW and Mercedes-Benz and open a U.S. assembly plant.

The New Beetle is one of the industry's most anticipated new models this year. Its predecessor was the most popular car in history, surpassing the Model T, with more than 15 million in sales. Indeed, the Beetle's quirky design, low price, and legendary dependability created a cult following. "It was just completely different from any other car in the world," says James Flammang, author of the book Volkswagen: Beetles, Buses and Beyond.

VW execs want to capitalize on the nostalgia, but they're also trying to create a separate identity for the New Beetle. "Where the original Beetle provided basic transportation, the New Beetle is an upmarket, lifestyle vehicle," says VW of America President Clive Warrilow. Based on the Golf chassis, it's bigger and more powerful than the original. Creature comforts, such as air conditioning and a six-speaker stereo, are standard, and options include antilock brakes and front-seat heaters. The engine is under the hood instead of in the rear, but the curvy exterior is remarkably similar to the classic Beetle. "Fundamentally, it's not going to be that different a car from the Golf," says Rene Rondeau, a 1950 Beetle owner in Corte Madera, Calif. "It's going to be one of those `fun' kind of cars."

TOUGH MARKET. Even with a base price of just under $16,000, making it competitive with the Ford Escort GX2 and the Mitsubishi Eclipse, the New Beetle may not be an easy sell. "The market for two-door sports coupes is contracting rapidly," says Lincoln Merrihew, an analyst at J.D. Power & Associates Inc. In addition to aging baby boomers, the car must attract younger buyers, he says.

Indeed, Volks-wagen will have to bring off some clever marketing if it wants to catch up with the growth rates of other European imports in the U.S. While most European auto makers enjoyed a strong 1997, with U.S. sales up 9% through November, VW sales were flat. Most of the gains for European auto makers were in the luxury-car segment that includes Mercedes-Benz, BMW, and Volkswagen's Audi unit.

A hit with the Bug, though, combined with strong sales of the Passat and Jetta, could help VW reach 200,000 in sales for the first time in a decade. That's a lot to ask of a little car. Then again, no car was ever loved like the Bug.

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