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Have They Gone Mad? VW Cutting Costs But Keep Money-Losing Phaeton

The mind reels.

Last July, Volkswagen announced what it called an “efficiency program.” The goal is to revive the automotive giant’s core brand and reverse negative profit margins. In the words of CEO Martin Winterkorn: “It’s no longer all about bigger, higher, further. Now it’s about being leaner, faster, more efficient.” OK then, so why on earth is VW keeping the large and premium Phaeton around after consistently failing to meet sales expectations? Industry analysts are pretty baffled by this and they really don’t have an explanation why.

The Phaeton’s continued existence pretty much goes against VW’s cost-cutting program. And get this: the upcoming redesigned Phaeton will be switched to VW’s new MLB modular platform, a move that’ll require an investment of as much as 650 million Euros. It just doesn’t make sense considering the 310-model VW empire has typically prided itself on smart financial moves. Perhaps the Phaeton will live on because it’s VW Chairman Ferdinand Piech’s pet project. Back in 2004, Audi’s North America chief, Axel Mees, was forced to resign after criticizing publicly both the Phaeton and Piech. And yes, the Phaeton will be re-launched in the US in the near future after getting pulled from the market in 2006 due to crappy sales.

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