VW's New Drive

More American-bred Rabbits?

At Volkswagen's sprawling headquarters in Wolfsburg, Chairman Toni Schmuecker and his top aides are pondering a major question: Should the West German automaker build a second plant in the U.S.? A final decision is expected by year's end, and the early signs point toward a definite ja. A team of Volkswagen experts is already studying possible sites; the new plant would be an assembly operation that would put together the popular, front-wheel drive Rabbits and would probably be on the West Coast.

The case for a second factory is strong. For one thing, Americans are buying small fuel-efficient autos at a faster pace than ever. Since the onset of the gasoline squeeze at the pump last spring, foreign imports have steadily expanded their share of the U.S. auto market, and in May accounted for a record 24.3% of all cars sold. During the first six months of this year, while sales of U.S. autos fell 7.9% below last year's level, forcing the carmakers to cut back production and lay off workers, foreign automakers sold 14.7% more cars. Volkswagen, for its part, has been extremely pleased with the quality and productivity of the New Stanton, Pa., plant at which it has been assembling its hot-selling, 26-m.p.g. Rabbit models since 1978.

Since that year, when it became the first foreign automaker ever to produce cars in the U.S., Volkswagen has been winning back part of the ground it lost in the mid-1970s to the Japanese trio of Toyota, Datsun and Honda. While Volkswagen's sales rose 13% worldwide dur ing this year's first half, they spurted ahead 41% in the U.S., where the company is now the fourth largest seller of foreign cars, with 3.4% of the market. Volkswagen's goal is a 5% share, and it could easily sell more cars now if it had them.

Financially, it is more attractive to build cars in the U.S. than to import them from West Germany; because of the high wages and constantly climbing value of the German mark relative to the dollar, the total hourly labor costs amount to about $13.60 in Germany, vs. only $9 at the Pennsylvania factory.

Even in the unlikely event it decides against a second American plant, Volkswagen, which is engaged in a threeyear, $3.2 billion expansion program that is the largest in its history, has already budgeted about $640 million to build an engine plant in Mexico and to increase production at the Pennsylvania plant from the present 800 autos per day to 1,040 by 1981 . Schmuecker's strategy is eventually to make the North American operation 90% self-sufficient, with only transmissions supplied from German plants.

Volkswagen's moves are certain to cause other foreign automakers to recon sider their plans for producing in the U.S. Volvo, which two years ago canceled plans to start production at the plant it owns in Chesapeake, Va., might be tempted to produce its new lightweight "Car of the Eighties" there. The Japanese, who face much the same currency problem as the Germans, are bound to consider American production seriously as a way to stop Volkswagen from regaining for good its old dominance over them in the U.S.

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