Volkswagen Aims at Fast Lane in U.S.

HERNDON, Va. — Volkswagen AG has one of the brashest goals in the auto industry—to dethrone Toyota Motor Corp. as the world's largest automaker. There's a hitch: In the all-important U.S., the VW brand clings to just 2.2 percent of the market, trailing even Korean upstart Kia, The Wall Street Journal reported.

Now, VW is gunning to reconquer lost ground here with a strategy it resisted for decades: tailoring its cars to mainstream American driving tastes. The first real test of that plan begins this week, as VW rolls out a comprehensive marketing campaign for a bigger and cheaper version of the Jetta, its top U.S. seller, which has just hit dealership floors.

"A lot of people worry that we are going to start making VWs for the masses," says Mark Barnes, VW's U.S. CEO. "I like to say we're going to bring the masses to VW."

The retooled compact sedan marks the first time VW engineers have designed a model specifically for the United States.

Next year, a new family-size sedan is scheduled to roll off the assembly lines at a newly built $1 billion plant in Chattanooga, Tenn. It is VW's first U.S.-made car since the 1980s. On its heels comes a revamped New Beetle.

"I am fully aware that Volkswagen was too cautious for too long in North America," Volkswagen Chief Executive Martin Winterkorn said at a test-driving event for the new Jetta in San Francisco this summer. His remark was a nod to the car maker's decades-long penchant for deploying cars designed for European tastes across the Atlantic. That left its U.S. operations with models too small and expensive to go head-to-head with Asian and American rivals. Now, he vowed, "we have turned that upside down."

Much is riding on the strategy. To become the world's largest car maker by 2018, Mr. Winterkorn and his management team have set themselves a lofty goal of selling 800,000 VWs a year in the U.S. by then, and another 200,000 cars from its luxury moniker Audi. VW executives have said they aim to become profitable in the U.S. by 2012 or 2013, selling 400,000 VW-brand cars annually by then, after racking up losses in the U.S. of close to $1 billion in some recent years.

It's an audacious—and some analysts say, impossible—target.

The company sold 213,454 VWs and 82,716 Audis in the U.S. last year. That's down from 577,000 VWs at its peak in 1970, when it was the emblematic vehicle of the counterculture and America's top-selling import. It doesn't help that the overall U.S. auto market shrank by one-third, or 5.7 million annual car sales, between 2007 and 2009, and isn't expected to return for years to its pre-crisis level of 16 million annual sales.

To get there, VW has to prove that it is capable of producing cars with mass-market appeal, something no European auto brand has achieved in the U.S. in recent decades. It is seeking a tricky balance: preserving the whimsical aesthetic and German engineering expertise that has won it a core base of Volkswagen loyalists, while broadening its appeal to mainstream drivers of more generic but trusted rides from the likes of Toyota and Honda Motor Co.