Saturday, August 22, 2009

Volkswagen Polo to compete with Swift, i10

Volkswagen India (VW) will launch its first small car, the Polo, in the domestic market in the early part of 2010. The car will be priced and positioned in line with the A2 compact car category, which includes models such as Maruti’s Swift & Ritz, and be built on a new platform. The Polo will be made at the company’s new manufacturing facility at Chakan, Pune, with locally sourced auto components being about 50 per cent.

“The all-new platform for the Polo has been designed keeping Indian road conditions in mind. The Polo will be benchmarked against the market leader in this segment, which is Maruti Suzuki’s Swift. The broad positioning for the Polo would revolve around communicating Polo’s German engineering pedigree, adapted for the domestic market,” says Neeraj Garg, Director, Passenger Cars Division, of the VW Group. Garg says the wait to launch the Polo is well-timed, since by next year, car manufacturers like Nissan, Toyota and Ford would unveil their compact cars in the premium A2 segment. The Polo would be available in the petrol and the diesel engine variant.

Volkswagen’s strategy in the compact segment, according to Garg, would be launching variants of the Polo initially. “Later, we would consider launching other Volkswagen brands, as long as there’s demand in the market. We hope to sell around 30,000 units in 2010. Then, by 2014, we hope to cross the 100,000 mark, by which time the car market in India would have crossed two million units.” Garg added the VW Golf, another compact car brand, will not be launched in the country until 2010. VW sold around 1,500 units of passenger vehicles in calendar 2008, and hopes to double the amount in 2009.

Till date, Volkswagen India has invested Rs 3,800 crore in setting up its operations in India. The facility at Chakan has an annual capacity of up to 110,000 cars on a single shift. Till this production capacity is reached, said garg, there would be no more fresh investments.

On the issue of Porsche becoming a part of the Volkswagen Group, Garg said Porsche will continue to be sold as a premium luxury car. “Porsche will not lose its identity. We are brand sensitive. It ‘s too early to say how the domestic operations of Porsche will be affected by this move.”

Industry executives say the premium A2 car segment (hatchback) comprising models like the Swift and Hyundai’s i10 & i20 has grown by around 20 per cent between January to June this year, while the A1 and the entry A2 models have registered either declining sales (Maruti 800) or slower growth than the premium A2 segment.

Magna wants Chevrolet Russia as part of Opel deal

Magna International Inc.'s offer for German automaker Opel is sputtering over its request that rights to General Motor Co. Chevrolet vehicles in Russia be included in the deal.

The Canadian auto supplier is locked in a bidding duel for Opel with Belgian investment firm RHJ International SA. Magna, bidding together with Russian state lender Sberbank, wants GM's Chevrolet Russia business to be part of the Opel transaction, sources indicated Tuesday. GM is balking because Chevrolet is its high-volume seller in the region and it's highly profitable.

Magna's bid is clearly preferred by several German politicians and labour leaders, but its final offer as presented to GM varied from what the parties had discussed in previous weeks and contained elements around intellectual property and GM's Russian operations that could not be implemented, John Smith, GM's chief negotiator for the Opel sale, wrote on the company's Europe blog Tuesday.

"GM has partners in other parts of the world who have joint ownership of these assets," Mr. Smith said.""We simply could not execute the deal as submitted."

Those partners include Avtotor, which builds GM vehicles in the city of Kaliningrad, and Avtovaz, which operates a joint venture with GM in Togliatti that builds the Chevrolet Niva sports utility vehicle. Avtovaz is 25% owned by French carmaker Renault. GM's Chevrolet vehicles in Russia are based on products from its Korean Daewoo unit. Korea's government-run Development Bank is a major shareholder in GM Daewoo and is keen on seeing it grow.

Talks on reformulating a bid with Magna continue, Mr. Smith said. He said the rival bid from RHJ is completed and "would represent a much simpler structure and be easier to implement."

A deal with Magna could still get done. But GM would have to get something significant in return, people familiar with the matter said.

Magna's offer for Opel centers on a business strategy that would see sales of Opel vehicles expand dramatically in Russia and the post-Soviet states. Russia is backing the bid because it wants to use Opel technology to revive its own auto manufacturing capability, centered on Russian billionaire Oleg Deripaska's automaker GAZ.

As part of that commercial strategy, sources said Magna and its partner are also seeking control over all or part of GM's Chevrolet business in Russia. The Russian Chevrolet unit is said to be a cash machine for GM because it sources vehicles free of the country's import duty on foreign vehicles, making it a crucial unit as the automaker seeks to reverse nearly US$88-billion in losses accumulated since 2004.

"Not only is Magna having difficulty with this intellectual property issue, they're having difficult understanding that they're not going to get Chevrolet," said Warren Browne, GM's former top executive in Russia. "You're not buying a country. You're buying a brand -- Opel."

Mr. Deripaska has toured the GM-Avtovaz assembly factory and "understands" its value, one source said. Russia's political leaders and Magna executives are also familiar with the operation.

They'd be getting one of the leanest manufacturing facilities in Russia, with an experienced workforce, said the source. "Magna gets to jump in and doesn't have to clean up anybody's mess. They could walk into that plant and get 85,000 to 100,000 units worth of capacity without untangling anything."

Mr. Deripaska's GAZ is still struggling to modernize its car lines and assembly operations. According to Russian media reports, its passenger vehicle business is close to collapse and last week received another state bailout of 5.6 billion roubles ($195-million).

Aurora, Ont.-based Magna and Sberbank are together offering 500 million euros ($766-million) for Opel and its U.K. unit Vauxhall. The partners have offered to pay more cash right away than initially planned. They will each take a 27.5% stake in Opel. GM would retain 35% while Opel workers would be offered 10%.

GM takes more time to negotiate Opel sale

General Motors is taking more time to negotiate with Magna and RHJ International over the planned sale of its European arm Opel, the U.S.-based company said on Tuesday.

Canadian auto parts group Magna and Belgium-based RHJ are locked in a takeover battle for Opel, in which GM is relinquishing control in return for state support.

GM was expected to recommend one of the two bidders to its new board of directors at a meeting on Monday. But it said on Tuesday it merely brought the board up to speed on talks without making a recommendation as negotiations were still dragging on.

German government officials and GM representatives are expected to meet with Magna and RHJ this week to further discuss the sale, sources said earlier this week.

GM, which holds 35% of Opel shares, and Germany, which will provide state aid, must agree on the buyer but so far the two have disagreed. Germany prefers the Magna offer and GM likes RHJ's bid.

German Economy Minister Karl-Theodor zu Guttenberg had said in a weekend newspaper interview both suitors had to improve their bids to win government backing.

Magna, a Canadian auto parts supplier, wants to expand Opel's full-scale car assembly business and forecasts high growth rates, particularly in Russia, home of its bidding partner, state-controlled bank Sberbank.

RHJ aims to shrink production to return Opel to profit and may be open to selling it back to GM at a later date.

Ford remains top carmaker in Canada

Ford Motor Co. says it was the top-selling carmaker in Canada again in July, the second straight month it has stripped the title from perennial volume leader General Motors Co.

Ford said it sold 26,788 cars and trucks last month, a 47% increase over July 2008 and its ninth consecutive month of market share increases. Total sales for the automaker through the end of July are 2.3% higher than last year. The company said sales of its Fusion, Mustang and Escape among models were particularly strong.

Ford is offering a promotion to consumers whereby if a buyer test drives a Ford but ends up purchasing a competing product from a competitor, Ford will offer the consumer $100.

Other automakers also posted strong results last month. Volkswagen boosted sales 14.6% year-over-year. Hyundai saw a 37% sales increase.

Automakers report sales in Canada throughout the day Tuesday.
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