Volkswagen Removes Luxury Phaeton From U.S. Model Range

FRANKFURT, Nov 14, 2005; Reuters reported that Volkswagen will cut the top-of-the-line Phaeton executive sedan from its model range in the United States as of mid-2006, a spokesman for Europe's biggest carmaker said on Monday.

The decision is a setback for Volkswagen's efforts to compete against models such as the Mercdes-Benz S-Class from DaimlerChrysler at the high end of the premium market.

The Phaeton, a prestige project for former chief executive and current VW Chairman Ferdinand Piech, has already had to be unloaded in the United States at a price lower than the model commands in Europe.

Sales still lagged planned targets, forcing Volkswagen to start offering dealers premiums of $10,000 as well for every Phaeton sold.

Nevertheless, 2005 sales of the VW model through October halved versus last year to just 686 units in the world's largest car market.

This translates to an average rate of just under 70 units per month versus U.S. industry sales of over 1 million cars.

The model still grabs only a tiny fraction of sales compared with competitors' top-of-the-line cars.

Toyota's premium brand Lexus sells some 1,800 LS sedans every month, BMW about 1,200 7-Series sedans and Mercedes roughly 1,000 S-Class sedans every month, according to data compiled by Automotive News.

The move to drop the Phaeton also reflects VW's campaign to stem massive losses in North America, where 2005 results are expected to be in line with the 2004 operating loss of 907 million euros ($1.06 billion) it had in 2004.

VW has said it will not break even in North America in 2006.