VW to Update Plants, Develop New Models

Volkswagen, Europe’s largest auto maker, said Friday it will spend $36 billion on improving its production facilities and developing new models over the next five years.

The investment was approved by VW’s supervisory board here the same day the company began selling the first New Beetle in Europe--nine months after its U.S. introduction. VW is hoping the wave of Beetlemania that engulfed the American public this year will spill into its home market.

The bubble-shaped New Beetle, the first full redesign of the world’s best-selling car in 60 years, was aimed at spearheading VW’s renaissance in the U.S. by increasing the number of people visiting its U.S. showrooms and helping the sale of other models such as its Passat and Jetta sedans. VW’s U.S. sales jumped 65% in the first 10 months of 1998.

Initial European reactions to the car indicate it may generate the same interest it has been getting in the U.S., with waiting lists already stretching more than six months as the company’s European advertising campaign gets underway.

“You couldn’t go out in a Ferrari and get more heads turning,” said Brian Burrows, a 40-year-old London-based record-cover designer, who paid a hefty premium to become the first man in Britain to own a New Beetle. He imported his car from Canada earlier this year. It was the first New Beetle to land on British shores, a full year before the official introduction, which is scheduled for April 1999.

After Friday’s introduction in Germany, the car will go on sale in France and other European countries beginning in January.

It is unlikely, though, that the car will have the same percentage impact on VW sales in Europe as it did in the U.S., with only 80,000 being made for the European market. VW, already the largest car maker in Europe, sold 2.3 million units in that market last year.

The company, meanwhile, said the $36-billion investment will be used to develop and build a new luxury VW car; a sport-utility vehicle in a joint venture with Porsche; and other vehicles between 1999 and 2003.

“Another investment goal is to modernize capacity to an order-driven system,” VW said, referring to the company’s goal of creating “a breathing factory” that makes it easier to raise and lower production according to demand.

VW is looking to increase its worldwide production to about 6 million units by 2003, from 4.3 million cars last year, by improving productivity at its 38 sites around the world and expanding its model range.

VW said most of the capital will be spent on plants in Germany, including a new factory in Dresden to build a luxury brand under the VW name.