Phaeton: The People's Chariot

As with just about all the major manufacturers today, the recent comings and goings at Volkswagen AG present ideal fodder for a very intriguing business case study, if not a motion picture drama. When one considers the sheer number of major issues and events the company is concurrently dealing with, it's a wonder they get around to putting together any cars at all.

Consider, for a moment, some of the VW headlines over the last two years alone: A major supplier issue of ignition coils and subsequent image-damaging recall; aging model line and declining sales in both Europe and North America; unprecedented strength of the Euro vs. the US dollar; labor issues including executive management all the way through the unions; and finally, the legacy of a very proud and recently departed (to the advisory board) Porsche family member.

Volkswagen has risen from humble beginnings and near extinction to become one of the largest auto manufacturers in the world comprising other brands (Audi, Bentley, Bugatti, Lamborghini, Seat, and Skoda). While there are some very high-end brands here for sure, VW built its foundation on basic, affordable transportation, hence the "people's car" moniker. Fast-forward to present day, and VW has been enjoying increasing market share in several categories and continues to build on record-breaking models.

The current issue VW is facing, however, has to do not only with jostling their many brands to appropriately cover all segments globally, but also with the timing of their new model delivery. With mega-models like the venerable Golf and Passat, redesigns and introductions are a very big deal and should be exploited individually. Here we have the highly anticipated new Jetta and Passat coming out at basically the same time. And this while VW is trying to push their entire brand up-market, which has provided several resounding duds recently, including the R32 and W8.

It's almost as if there is a major shift in the focus and management of the company underway, but the people and models, which are on their way out, are trying to do one last good thing before they go (read 4Motion and extra horsepower for the above mentioned models). In no place is this fragmented strategy more prevalent than with outgoing chief Ferdinand Piech's Phaeton pet project.

Before departing, Piech had to prove that VW was capable of building it's own luxury models. So, it was surely a victory when German chancellor Gerhard Schroeder chose the Phaeton as the executive transport over longtime provider Mercedes-Benz. In typical German fashion, it wasn't just the car but how it was built that also counted, thus requiring the $200 million, state-of-the art Dresden facility, which resembles more a surgery ward that assembly line.

And just how does one place a $65,000 dollar "people's car" in a very crowded luxury segment, you ask? Well, there's an old story about a couple of golfers who came across a very large bear during a round that might help to answer that question. In a somewhat panicked state, one golfer immediately dropped his gear and took off for the hills. The other confused golfer yelled to his departing comrade, "Wait, don't run! You'll never outrun a bear!" To which his friend replied, "I don't have to outrun the bear, I just have to outrun you." This sentiment seems similar to what VW was thinking in launching what by many professional accounts is the premium luxury German sedan regardless of cost. It didn't have to blow everyone else away. It just had to be as good and come in at a lower price.

From a sales perspective, the Phaeton is a failure. Automotive journalists and industry folk alike are quick to attribute this to the well-ingrained notion that VWs are strictly a student or young person's affordable, entry-level ride. Just about everyone who has owned or driven a Phaeton agrees, however, that it is quite possibly the best all-around German sedan. Yes, the owners have some small quips -- they would like to see a short wheel base version, some Navigation updates and larger wheel package -- but they generally love the understated exterior styling matched with elegant interior trim.

Unfortunately, it looks as if the Phaeton is still going to suffer the same fiery fate that its namesake did. "Phaeton" was the mythical son of the Sun god Helios, who against his father's wishes took the family Chariot for a ride. As the crazed horses streamed out of control across the Earth, the unbearable heat singed valleys and dried up lakes, wreaking havoc on everyone in its wake, leaving Zeus no choice but to strike down the ride with a well placed thunderbolt.

Even though the thunderbolt didn't come from Mercedes-Benz or BMW, or even close cousin Audi, there may be more strategy here than you think. VW is already considering the Dresden factory to take over additional production from Bentley's at-capacity Crewe plant in England (Bentley sales of the Continental GT are through the roof). Additionally, there is talk of a new model placing above the Passat but below the Phaeton, which will certainly have paved the very slippery slope up-market.

Whether the Phaeton goes down in history as an elite car for the very few people in the know, or as a sacrificial lamb in a much larger company reorganization, is yet to be determined. Regardless, it will always remind us that the Porsche family is very clever. Lest we forget, they made an SUV out of a sports car.