Head of Audi of America fired.

[Quiggs]

This coming after an interview last week criticising the VW Phaeton.

VW Overestimated Brand Reach, U.S. Audi Exec Says

VW may return to building more affordable vehicles, after the lackluster reception for the Phaeton luxury sedan.

San Francisco - Volkswagen AG's efforts to expand the VW brand into the luxury segment may have been a mistake, Audi of America Inc.'s top executive says.

The comments are the latest evidence of a tussle within the VW Group, where executives appear to be second-guessing the launch of the up-market VW Phaeton luxury sedan.

The Phaeton has been a disappointment for the VW brand, with sales this year in the U.S. totaling only 1,433 units through October, according to Ward's data. The auto maker earlier said it expected to sell upwards of 2,500 units of the luxury sedan in the U.S. in 2004. If October's total volume of 305 units is a proper barometer, it appears Phaeton sales may reach only the 2,000-unit level.

Now, one of auto maker's top U.S. officials is publicly questioning whether the move was too ambitious.

"I think Volkswagen underestimated the weakness of their brand in the luxury segment," Audi of America head Axel Mees tells reporters here during a media rollout of the 2005 A6. "I think they realized the Phaeton... was a first step too fast into a direction they wanted to go.

"VW overall isn't ready to offer successfully cars in that price range, whatever they do," he adds. "It can be the best car (but) I still will not buy it because it has a VW logo." Mees says executives in charge of the brand at the time of Phaeton's development, most notably CEO Ferdinand Piech, were zeroed in on the wrong aspects of the VW organization when they developed the sedan.

He says the leadership was too focused on the engineering side of the business and the need to develop a top-notch luxury vehicle for the VW brand.

"He (Piech) wanted to prove he could build a good car. He didn't look at the marketing aspect, the brand aspect," Mees says.

VW also suffered from a long-standing image that relied on more affordable products, including the Jetta and Golf, the Audi executive says, adding that many VW dealers were ill prepared to meet the needs of luxury-vehicle buyers. They had a history of dealing with customers spending around $20,000 for a vehicle, not those willing to spend upwards of $80,000 or $90,000, he says.

"They overestimated the power of the Volkswagen brand," Mees says.

It is likely VW will shift its focus in the coming years and return to its roots: building high-quality, affordable cars, and potentially leaving the luxury side of the business to the Audi brand, Mees says.

"The VW model range will be gradually going down (range)," he says. Whether VW now will leave the luxury sector to Audi "is too early to tell," he adds.

Let's jump to today:

Axel Mees axed at Audi
Criticism of VW Phaeton, Piech leads to ouster

By Ralph Kisiel
Automotive News / November 17, 2004

DETROIT -- Axel Mees has been fired from his job as head of Audi of America Inc. for critical comments he made about the Volkswagen Phaeton luxury sedan and former Volkswagen AG Chairman Ferdinand Piech.

Mees has been vice president of Audi of America Inc. only since March 1. The comments that got him fired were made during his first major press event in San Francisco on Nov. 8. They were reported in the Nov. 15 issue of Automotive News.

Mees, 53, told writers that the VW Phaeton was not selling because Volkswagen underestimated the weakness of the VW brand in the luxury market.

He also stated that Piech "was an engineer and he wanted to prove that he can build great cars, and he didn't look at the marketing aspect, the brand aspect."

His dismissal comes just nine days after he made the comments during the launch of the redesigned Audi A6 sedan.

A terse statement released this morning by Audi of America in Auburn Hills, Mich., acknowledges only that Mees "has left the company."

A spokesman for Volkswagen AG in Wolfsburg, Germany, said that Mees was fired solely for the critical comments he made and not for slumping Audi sales in the United States.

Mees was responsible for the Audi brand in both the United States and Canada.

The company statement also said, "The current Audi leadership team will lead the brand and all its efforts until a new vice president is named."

The brouhaha comes at a critical time for Audi dealers in the United States and Canada. With last week's launch of the redesigned A6 sedan, Audi of America has embarked on a product blitz that will continue into 2006.

Gerd Klauss, head of Volkswagen of America Inc., was unavailable for comment this morning. Mees reported to Klauss.

Looks like VWoA only likes yes men. Mees was right, though.