VW will add SUV to U.S. lineup in 2016 amid $7 billion investment plan

VW's new SUV for the U.S. will be almost identical to the CrossBlue concept from last year's Detroit auto show.

Photo credit: VW
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DETROIT -- Volkswagen confirmed that it will introduce a mid-sized SUV tailored for U.S. buyers in North America in 2016 as the automaker seeks to improve lackluster sales of its namesake VW brand in the United States.

VW is also sticking to its goal to boost the combined annual U.S. sales volume of its namesake brand and the Audi premium marque to 1 million by 2018, VW said in a statement today.

"We want many more American drivers to feel at home with our group brands and are working to achieve that with 100 percent commitment and plenty of passion," CEO Martin Winterkorn said in the statement. "Volkswagen's midsize SUV for America is on its way."

The SUV is seen by VW executives and dealers as key to the brand's U.S. growth strategy. VW said the move was a sign of renewed commitment to the market after a sales decline by its core VW brand, which continues to achieve low U.S. quality scores.

The automaker also said it will invest $7 billion in the North American region over the next five years to revive sales.

Winterkorn declined to say whether the new SUV will be built at VW's Chattanooga, Tennessee, plant or in Mexico, where production of the latest Golf compact begins next week. VW favors Chattanooga over its plant in Puebla, Mexico, to build the SUV, two people familiar with the matter said on Jan. 10.

Phaeton return

Volkswagen's Phaeton sedan, the brand's luxury flagship, will also return to the U.S. market in 2016, Winterkorn said.

VW displayed a prototype of an SUV, dubbed the Crossblue, a year ago at the Detroit auto show. A company spokesman said the final product will be almost identical to the CrossBlue. The seven-seat concept was modeled after popular models like the Ford Explorer and Toyota Highlander. "It is that car," Volkswagen of America spokesman Scott Vazin said. "The basic design [of the concept] is exactly what you'd see coming to market."

SUVs and crossover vehicles widened their share of the U.S. car market in 2013 to 30.9 percent from 29.7 percent a year earlier, according to Autodata Corp., an automotive research company.

VW's SUV offerings in the country are currently limited to the compact Tiguan and the $43,995 mid-sized Touareg, which is priced 11 percent more than the premium Lexus RX from Toyota.

U.S. woes

VW, the world's third-biggest auto manufacturer behind Toyota Motor Corp. and General Motors Co., saw record deliveries of 9.7 million units last year thanks to rising demand in China and market share expansion in Europe. Those gains contrast with a struggle to raise VW's presence in the United States, a market that would help the company meet its goal of taking the global industry sales lead by 2018.

Unlike VW's luxury Audi and Porsche nameplates, the mass-market VW brand failed to grow in the U.S. last year. VW brand's U.S. sales fell 6.9 percent in 2013 to 407,704 cars and SUVs, with demand plunging 23 percent in December. That's about half the 800,000 yearly vehicle sales targeted for the market by 2018. The VW brand's global deliveries rose 3.4 percent.

Audi's U.S. sales rose 14 percent to a record 158,000 cars last year. Audi is expected to contribute 200,000 cars per year to VW's annual sales goal of 1 million vehicles in the U.S. by 2018, according to previous statements.

VW named Michael Horn in December to become head of the manufacturer's U.S. business in January, replacing Jonathan Browning in the post after a little more than three years to pursue the company's expansion plan in the region.

VW must improve "the speed at which we bring new models to the market and innovation to the market," Horn told Reuters on Sunday. "We have already been improving."

As part of a product offensive, Audi also plans to launch the A3 compact and Q3 compact sports utility in North America this year.

Gabe Nelson, Bloomberg and Reuters contributed to this report

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