With the core Volkswagen passenger car brand ordered to cut costs severely and raise profit, the company still managed to surprise experts and analysts with its recent drive to spend millions of euros to try and revive a loss-making premium sedan.
Starting at 76, 000 euro ($86, 192), the Phaeton is VW’s namesake brand luxury flagship – a model that internally competes with the Audi A8. One of the favorite projects of Chairman Ferdinand Piech, the model never rose to anyone’s expectations as it failed to even hit initial sales goals of delivering 20,000 units per year. According to analysts and experts, the German automaker would be far better if the model is axed, considering it cost way above 1 billion euros ($1.13 billion) to develop when it was originally unveiled back in 2002. Recent rumors coming from people with knowledge of the matter that talked under condition of anonymity with Reuters now indicate the brand is ready to refresh the Phaeton – though numerous experts say it’s one of the worst “loss-making European cars of modern times.”
The idea of refreshing and upgrading a car that has yielded losses of 28,000 euros on each unit sold between 2002 and 2012 – according to Bernstein analyst Max Warburton – seems at least baffling. That’s because VW has already embarked on a cost cutting drive that would see the company save 5 billion euros ($5.67 billion) annually by 2017 – with the second-largest auto group aiming to become even leaner as it narrows the gap with Japan’s Toyota, the biggest automaker globally.