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VW’s Severe Sales Problem in U.S. Grows

Douglas A. McIntyre

Volkswagen may have prevented  the UAW from unionizing its plant in Tennessee. However, labor relations is among the least of the German car company's trouble in America. Declining sales and quality problems continue to keep VW from being competitive among the global car manufacturers which do business in the U.S.

The latest blow to VW's effort to make progress in America comes from the new J.D. Power 2014 Vehicle Dependability Study. This research provides a key tool for people who are buying new cars because it indicates how well the quality of the brand holds up over time.  VW fell far below the average with 158, based on problems per hundred vehicles. All the brands made by General Motors Co. (GM), Ford Motor Co. (NYSE: F), Toyota Motor Corp. (TM) and Honda Motor Co. Ltd. (HMC) did better than VW. The industry average is 133. The perception of quality drives brand loyalty, which makes VW's trouble even more disastrous.  The survey's researcher wrote:

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J.D. Power also finds that the fewer problems owners experience with their vehicle, the greater their loyalty to the brand. Combined data from previous years' VDS results and vehicle trade-in data from the Power Information NetworkÆ (PIN) from J.D. Power show that 56 percent of owners who reported no problems stayed with the same brand when they purchased their next new vehicle. Brand loyalty slipped to just 42 percent among owners who reported three or more problems.

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The ultimate measure of consumer demand, is, of course, sales. After years of unsuccessfully fighting to take market share from its competitors, VW had another poor start in 2014. In January, its sales plunged 19% to 23,494. Market share dropped from 2.8% in the same month a year ago to 2.3% this January. Even luxury niche manufacturer, Mercedes, did better.

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VW has often stated that it wants to be the largest manufacturer in the world. It holds that position in Europe, and perennially competes for the No.1 spot in China--the world's largest car market--with GM. However, the U.S. remains the second largest car market in the world. The road to first place worldwide is blocked, without success here.

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