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April 6, 2005

DENMARK: Volkswagen expects profit on new-generation Fox

Volkswagen's new Fox small car will be profitable in the first generation of the new model helped by low production costs, chief executive Bernd Pischetsrieder told Bloomberg News.

Volkswagen’s new Fox small car will be profitable in the first generation of the new model helped by low production costs, chief executive Bernd Pischetsrieder told Bloomberg News.

Following a presentation of the Fox in Copenhagen, Pischetsrieder reportedly said Volkswagen builds the Fox in Brazil, where car production is “much cheaper”’ than in Germany, and has the capacity to produce 200,000 units annually, though he declined to provide any specific profit or sales targets for the car.

Bloomberg News noted that the first generation of most cars, which are usually built for about seven to eight years, often don’t produce profits for car makers because of the costs to develop and design the vehicles, but Pischetsrieder said the Fox shares components with other Volkswagen small models, helping to keep development costs lower.

“The Fox is a good model for young customers,” Michael Schneider, a fund manager at Deka Investment in Frankfurt, told the news agency, adding: “It’s an inexpensive car and is cheap to make.”

Bloomberg News said the Fox comes with 1.2 litre and 1.4 litre engines, producing between 55 and 75 horse power, starts at €8,950 euros in Germany and will be sold there from April 29.

It comes to the UK in 2006.

Bloomberg News noted the Fox has been sold in Brazil since 2003 and about 130,000 units were sold in South America’s largest economy last year.

Bloomberg News said Volkswagen plans to win Fox customers from Japanese and Korean competitors such as Hyundai, which have boosted market share with low-priced cars.

The company reportedly is targeting customers aged 18- to 30-years-old for the car who might otherwise purchase a used vehicle – the Fox, which competes with models such as Fiat’s Panda, makes up part of a segment of about a million units that are sold in Western Europe each year.

Bloomberg News said the Fox is the third model Volkswagen has introduced this year, following the Passat and the Jetta [Bora].

The company aims to reach a 9 percent return on capital from all its vehicles, including the Passat, Pischetsrieder reportedly said, declining to say how many models of the Passat Volkswagen aims to sell annually, adding that the market for sedans is shrinking.

He told Bloomberg News the company won’t introduce a new model to close the price gap between the Phaeton and the Passat before 2011 – the company is considering several ideas and the new car probably won’t be a sedan.

Sales in the US won’t decline this year, the chief executive told Bloomberg News – the new models will eventually help boost sales there [the US is the Jetta’s biggest single market] though the Fox “certainly won’t” be introduced in the US.

Fox sales start late April

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