Volkswagen is on the verge of a bold new era. The "people's car" specialist is reinventing itself for the new millennium in a bid to broaden its horizons and fatten profit margins. No longer content with catering just to the econobox sector of the market, the Wolfsburg-based company has its sights set on tackling German rivals Mercedes-Benz and BMW in the premium stakes.
The driving force behind VW's ambitious plans is, not surprisingly, the man at the helm, Ferdinand Piech, grandson of Ferdinand Porsche. Piech has been widely credited with turning Volkswagen around and steering it to record sales and profits since taking charge in 1993, when the company was losing over $1 billion a year.
VW has posted record sales for each of the last six years and Piech has stated his goal of turning the company into a global powerhouse. He has also made public his ambition of beating Benz and BMW at their own game. "They are moving down into our territory so we have to fight by moving up into theirs," he declares.
Piech is renowned as a passionate car enthusiast who loves to tinker with engines. He managed to inject some pizzazz into the brand even as he pursued a ruthless cost-cutting program, slashing the number of basic platforms from 16 to 4.
Some analysts suggest nothing beats the mastery of his introduction of the New Beetle, a project he championed in the face of in-house sceptics. The new-age Bug has led a revival of Volkswagen's US sales even though its high pricing means its popularity has dwindled in Australia. (A 1.6-litre version introduced Down Under in January might help rectify this situation).
Although Piech's achievements have earned him much respect, he has also faced criticism from some quarters for fostering a somewhat dictatorial, management-by-fear culture at VW.
Time will tell how much of his legacy remains after he steps aside from the helm on April 16, making way for Bernd Pischetsrieder, currently Seat's brand manager and formerly in charge of BMW.
Piech will subsequently be named chairman of VW's non-executive supervisory board and some industry observers believe he will continue to pull the strings.
Under German corporate law, the supervisory board, not the CEO, appoints management board members, which may prevent Pischetsrieder from assembling the team he needs to assume effective control of the company.
Meanwhile, Piech is clearly enjoying his swansong and even finds time for an impromptu trip to Sardinia to address a contingent of motoring hacks (including yours truly) in attendance for the recent international media launch of the new Polo. But any probing questions posed by the journos are met with tongue-in-cheek responses by the VW supremo, who is in a surprisingly jovial mood.
"My goal for Volkswagen is that it should do well enough to pay my pension for the next 25 years," he offers when asked about his dream for the company.
Opinion is divided as to whether there will be a dramatic change at VW once Pischetsrieder slips into the chair currently occupied by the autocratic Piech. But VW research and development chief Dr Martin Winterkorn (recently appointed head of Audi) told AutoSpeed it would be business as usual even after the changing of the guard in April.
"Volkswagen will remain an engineering-oriented company," he says. "Dr Pischetsrieder is an engineer, like Dr Piech and myself. There is a difference though...Dr Pischetsrieder is much more market-oriented."
The short-term challenge facing VW is to successfully launch its Phaeton luxury car (codenamed D1) and Colorado off-roader, both of which are due to debut within the next 18 months, taking the German car-maker into hitherto uncharted waters. Longer than a Mercedes S-class, the Phaeton will be pitched squarely against flagship offerings from Mercedes-Benz and BMW.
"Why is D1 (Phaeton) important?" Piech asks. "Because there is demand for such a car and there is a lot more money to be made from one D1 then one Polo. Not many manufacturers have the capability to build such a car."
"We have 60 per cent customer loyalty but there is nothing to move up to beyond a Passat. We need to retain those customers," says Detlef Wittig, VW board member in charge of sales and marketing.
"It (Phaeton) will be an attractive product, offered with the choice of a petrol W12 engine and a 10-cylinder diesel with 750Nm," Wittig says. "We will build a personal relationship with the customer by allowing them to follow their car on the production line or via the Internet. One-third of our customers may take up this offer."
Wittig said VW expects to shift about 10,000 Phaetons during the first 12 to 18 months. Incidentally, the W12 engine is known as such because it is formed by mating together two narrow-angle V6s.
The other significant newcomer in VW's product pipeline is a luxury off-roader, known for now as the Colorado. Sharing its underpinnings with the imminent Porsche Cayenne, Colorado will enable VW to take on the BMW X5 and Mercedes-Benz M-class in the burgeoning premium SUV segment.
The Magellan concept unveiled at the recent Detroit motor show provides an indication of what the final product will look like. It is expected to be offered with a wide choice of engines - ranging from a 2.8-litre V6 to a barnstorming 6.0-litre W12.
Also in the pipeline is a new-age Kombi van, and some clues to the proposed minibus may be found in the Microbus concept unveiled at last year's Detroit show.
Meanwhile, Piech says VW's much-publicised "three-litre Lupo" (referred to as such because it consumes as little as three litres of fuel per 100km) is just a hint of things to come. "When will we see a two-litre (per 100km) car from VW?" he asks. "Never. We are aiming for one litre per 100km. My highest wish is to go home from the shareholders' meeting on April 16 on just 1.5 litres."
Not a bad feat considering he lives 160km from VW's Wolfsburg headquarters.
But what about the Golf - the car that has been VW's bread and butter for the past 25 years? Glad you asked. Expect the next-generation car, due in 2003, to grow in size and spawn and MPV (people-mover) variant. "The design for the next Golf is radical, but it was chosen simply because it was the best one put forward," design chief Hartmut Warkuss told AutoSpeed.
Engine choices are expected to range from a 1.6-litre diesel to a 2.8-litre V6. Warkuss hinted the next-generation car may embrace the "tall-boy" styling that is increasingly becoming the norm among small cars. This should endow it with similar levels of interior space to Peugeot's recently released 307.
"There is definitely a trend towards higher cars, but these have a penalty in terms of higher fuel consumption," Warkuss said. "EuroNCAP regulations for pedestrian protection mean it will be more difficult to build a lower, flatter car...but it will still be possible to come up with an emotional design.
"Ford has talked a lot about New Edge styling, but I personally don't think this trend will conquer the world. The trend we will see is clear, crystalline shapes with more edges and less rounded lines."
Apart from introducing an array of top-shelf products, Piech's other desire is to see at least two or three of the VW brands represented in top-level motorsport - with the exception of Formula One (he claims).
Expect to see Bentley pressing on with its Le Mans assault, while Spanish stablemate Seat gears up to tackle the European tin-top circuit. Also get set to see a hot 3.2-litre Golf (dubbed R32) with 4Motion all-wheel drive, 18-inch wheels and Audi RS4 brakes contesting series production racing. "The R32 Golf won't run away and hide, but it should do well on circuits that suit us," VW Group Australia spokesman Brad Leach says.
The exciting Beetle RSi - which derives its motivation from a 3.2-litre V6 - is also intended for competition. Expect to see the bespoilered bug in action in the Targa Tasmania tarmac rally, piloted by Kiwi ace Steve Millen.
The Volkswagen Group is now placed at an exciting juncture. Piech has seen to it that the company is a profitable entity, largely as a result of its strength in the low and medium sectors of the market. VW, Skoda and Seat have all delivered the goods in this respect.
The challenge remaining now is for the European car-maker to show it can crack the potentially lucrative premium segment. The master plan it has in mind is for Seat to tackle Alfa Romeo, while Audi takes on BMW. But perhaps the toughest task is left to VW, which must beat Mercedes-Benz on its own playground.
The maker of the "dak dak" challenging Benzes? Who would have thought it possible even a decade ago?