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Will Volkswagen Shutter Phaeton Assembly Plant?

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On: Fri, Nov 27, 2015 at 9:00AM | By: Carl Malek

Will Volkswagen Shutter Phaeton Assembly Plant?

Amid the ever-growing fallout that is a result of Dieselgate, Volkswagen could be forced to make some drastic moves to cut costs to weather the storm, including the closure of the firm's plant in Dresden, thus ending production of the ultra-luxurious Phaeton sedan.

It is no secret that Volkswagen's Dresden facility is an engineering masterpiece with workers building the Phaeton luxury sedan in an environment that is highly sanitized and features state of the art production methods (including a moving wooden floor). However, with an estimated $87 billion in fines in its immediate future, Volkswagen will need to make some radical moves to absorb the blow of this hefty sum, and the shuttering of the Phaeton's assembly plant could very well be in the cards, signaling the end to a project started by Ferdinand Piech back in the early 2000s.

VW Group CEO Matthias Mueller is said to be a key supporter of shutting down the facility and either end Phaeton production, or move production to another facility that could do the job in a more efficient and streamlined manner. This is according to a report published by Automotive News that also reveals that the company's supervisory board will also discuss this very notion when it meets for its next meeting.

When one looks at the facts, Mueller can certainly make a very strong financial argument for closing the Dresden plant. The facility does employ about 500 people, but they produce only eight Phaetons a week. This marginal figure would normally be very good if the Phaeton was a strong seller; unfortunately the Phaeton has been a sales flop for the company essentially right from the start. According to a separate report by Automotive News, Volkswagen sold only 4,000 units in 2014 and a slightly higher 5,300 cars in 2013. These figures do little to make up the estimated $30,000 that Volkswagen lost on each one sold from 2002-2012. The reception was so lukewarm that Volkswagen was forced to admit defeat in the normally strong U.S. market, pulling the Phaeton out of the rotation due to low sales and equally slow demand for the posh four door several years ago.

However, despite the strong justification for its closure, Mueller and VW will have to put up a fight to formally shut down the plant. The closure for the plant does require a two-thirds vote by the supervisory board, and labor representatives for Germany's unions hold half of the seats. The ensuing clash between VW and these unions could bog down the process, turning it into a long struggle. "Dresden is, and remains, a firm part of the Volkswagen family. Even if the new Phaeton concept comes later, that does not mean that we have the cause to question Dresden," stated works council boss Bernd Osterloh in an interview with Automotive News. If the company does close the factory, it would transfer the workers to other sites.

Despite the shaky future of the plant, Volkswagen is still standing behind its troubled flagshipsedan. After the diesel scandal blows over, the company promised that the next generation would embrace green technology and become an electric vehicle, while refocusing its mission as the brand's flagship vehicle. It was rumored that VW developed a new version of the Phaeton on the MLB platform earlier this year; that was ultimately scrapped due to cost cutting which affected the overall design of the car. VW Group of America CEO Michael Horn also promised an eventual return of the Phaeton to U.S. shores, though it will be interesting to see if VW's marketing team can make up for all the errors and pitfalls in the car's advertising and marketing strategy that doomed the previous generation Phaeton to a life of failure and obscurity when it was first offered in the U.S. market.


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