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Volkswagen Delays Next Generation Phaeton; Low Sales and Material Costs To Blame

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On: Wed, Aug 26, 2015 at 8:52AM | By: Carl Malek

Volkswagen Delays Next Generation Phaeton; Low Sales and Material Costs To Blame

Ferdinand Piech can be credited for many things during his long tenure at Volkswagen, from building the VW brand empire to approving the sensationally stunning Bugatti Veyron hypercar. His mark on the company will certainly be noticed for a long time. However, Volkswagen revealed that it has delayed the introduction of the next generation Phaeton, another car that was spearheaded by Piech.

Unlike the Veyron, the Phaeton was never a sales smash; the previous generation Phaeton actually left the U.S. market after slumping sales forced the company to admit defeat and focus on other world markets. Since then, the Phaeton has been tweaked and updated over the thirteen or so years that it has been produced, and rumors persist about the car possibly returning for another shot at the U.S. market. However, in an announcement released earlier this week, Volkswagen revealed that it has delayed the introduction of the next generation Phaeton in what could be a formidable hurdle for the slow-selling flagship model.

According to company insiders, the next generation Phaeton (which was developed on the all-new MLB platform) is ready to go right now, but a separate report fromBloombergstates that executives at VW have ordered that the team behind the Phaeton must lower the costs of both production and materials before they will give the official green light for production. Currently the Phaeton is assembled by specially trained white-gloved technicians that obsess over every detail. Naturally this is a tempting area to start cutting pennies but it is important to consider that these same men and women built a mere 4,000 units last year. This is even fewer than the recently axed and just as slow-selling Volkswagen Eos which recorded 3,411 sales in the U.S. last year.

The man behind the recent push for cost cutting is relatively new hire Herbert Diess who was brought in to help bring the company's financials into shape. To him the Phaeton is a mere speck in the broader corporate landscape that Diess aims to bring under his control, but it is a very important detail that cannot be ignored when put into the big picture. Diess plans to raise VW's profit by more than 6 percent while chopping $5.5 billion in excess costs before the 2018 model year. This preliminary figure is much higher than the 2.7 percent profit that the firm has recorded so far in 2015 and is higher than the profit margins at some of its major rivals, especially the French conglomerate PSA Peugeot-Citroen.

Prior to these delays, it was speculated that the next generation Phaeton would go on sale sometime in 2017 or 2018. However, this recent delay could put a damper on these plans and it is unknown just how far it will be pushed back due to the changes that Volkswagen executives are clamoring for. If it does make its return to the U.S., look for the car to compete not onlywith rivals from Hyundai, Kia, and Lexus, it will compete internally with its brand siblings, the Audi A8 and the Bentley Continental. While it is unknown how a revamped Phaeton would do in the U.S. market, it will have to avoid the same pitfalls that befell the original Phaeton, especially in terms of its MSRP and its lackluster exterior styling.


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