The Beetle Stalls

If a single product could take credit for West Germany's "economic miracle," it would be the Volkswagen Beetle. Since the start of production 36 years ago, 18 million copies of the inelegant rear-engine car designed by Ferdinand Porsche have been sold round the world; yet now the world's joyride with the Beetle appears to have stalled, so thoroughly that production has ground to a temporary halt.

Worldwide sales of Volkswagenwerk AG have slumped 21.6% so far this year, and officials openly predict that the company in 1974 will suffer the first full-year loss in its history. (Profits in 1973 were $40 million; at their peak in 1966 they totaled $151 million.) Last week Volkswagen closed down most of its West German plants and gave 45,000 workers a two-week furlough with partial pay.

Company spokesmen cite rising costs as the principal cause of Volkswagen's financial troubles. During 1974, they say, the company faces wage increases of $221 million and a jump of more than $301 million in material and shipping costs. Moreover, the oil crisis has left a lingering reluctance on the part of many consumers to buy new cars, even the gas-efficient, economy Beetle.

Hammering Away. A bigger factor, however, is that the Beetle is not the economy car it once was. Largely because of repeated devaluations of the U.S. dollar and upward revaluations of the German mark, the price of Volkswagens in the past 18 months rose 30% in the U.S., a market that accounts for one-third of all Beetle sales worldwide. The port-of-entry price of a Super Beetle in the U.S., without options or accessories, is $2,849, compared with a basic $2,442 for a similarly stripped-down Ford Pinto. It is a fact that U.S. and Japanese competitors have been quick to exploit--Ford TV ads, for instance, hammer away at price comparisons between the Super Beetle and the Pinto--and during the first quarter this year U.S. sales of Volkswagens plummeted 28%.

Even in Europe, Volkswagen is meeting increasingly stiff competition from small-car competitors like Simca and Opel, and this year's sales in West Germany have dropped 18%. Despite the high price of fuel, Volkswagen has even been losing a good share of its market to the much thirstier Mercedes-Benz, suggesting to some VW officials that the beloved Beetle configuration may have finally outlived its attractiveness. As a result, the company that once turned a one-model line into an advertising asset has been introducing a whole new array of cars.

The man in charge of this transformation is Rudolf Leiding, 59, a onetime repair-shop manager who became chairman of Volkswagenwerk three years ago. Though 5,500 Beetles had continued rolling off the assembly lines each day until last week's shutdown, Leiding has been gradually shifting some of Volkswagen's eggs out of the Beetle basket. Volkswagen's subsidiary, Audi NSU Auto Union AG, formed in 1969, now offers medium-priced and expensive (up to $5,360) sedans, most notably the Audi 80, called the Fox in the U.S. Sales of these cars are rising faster than anything else the company makes. Last August, Volkswagen introduced the Passat, a conventional-shaped, water-cooled sedan. Renamed the Dasher for the American market, 9,273 have already been sold in the U.S. this year. A four-seat sports coupe dubbed the Scirocco debuted in Europe this winter and will soon appear in the U.S.

Will the Beetle disappear? Company spokesmen have repeatedly denied any intention of ceasing production altogether. But they are gearing up for production of a front-engine, water-cooled car called the Golf. Featuring lower horsepower than the current lowest-powered Beetle and a lower price, the Golf seems aimed at the very economy-car market created by the Beetle two decades ago.

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