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Volkswagen (Ger. "people's car", pronounced IPA) or VW for short, is an automobile manufacturer based in Wolfsburg, Germany in the State of Lower Saxony.

Origins in 1930s Germany

Though the origins of the company date back to the 1930s, the design for the car that would become known as the "Volkswagen Beetle" date back even further, as a pet project by car designer Ferdinand Porsche (1875–1951). Adolf Hitler's desire that almost anybody should be able to afford a car coincided with this design—although much of this design was inspired by the advanced Tatra cars of Hans Ledwinka.

Hitler had a keen interest in cars but was not particularly technically knowledgeable himself and demanded Porsche make changes to the original design to include better fuel efficiency (to make it more economical for the working man), reliability, ease of use, and economically efficient repairs and parts. The intention was that ordinary Germans would buy the car by means of a savings scheme ("Fünf Mark die Woche mußt Du sparen, willst Du im eigenen Wagen fahren" — "Save five Marks a week, if you desire to drive your own car" which around 336,000 people eventually paid into. Volkswagen honored its savings agreements after World War II; Ford, which had a similar "coupon" savings system, reportedly did not. Prototypes of the car called the KdF-Wagen (German: Kraft durch Freude = "strength through joy"), appeared from 1936 onwards (the first cars had been produced in Stuttgart). The car already had its distinctive round shape and air-cooled, flat-four, rear-mounted engine, features similar to the Tatra. The VW car was just one of many KdF programs which included things such as tours and outings.

Erwin Komenda, the longstanding Porsche chief designer, developed the car body of the prototype, which was recognizably the Beetle we know today. It was one of the first to be designed with the aid of a wind tunnel; unlike the Chrysler Airflow, it would be a success.

The new factory in the new town of KdF-Stadt, now called Wolfsburg, purpose-built for the factory workers, only produced a handful of cars by the time war started in 1939. None were actually delivered to holders of the completed saving stamp books, though one Type 1 Cabriolet was presented to Hitler on his fiftieth birthday, in 1938.

War meant production turned to military vehicles, the Type 81 Kübelwagen utility vehicle (VW's most common wartime model) and the amphibious Schwimmwagen.

1945: British Army and Ivan Hirst, unclear future

The company owes its postwar existence largely to one man, British Army officer Major Ivan Hirst (1916–2000). In April 1945, KdF-Stadt and its heavily bombed factory were captured by the Americans, and handed to the British to administer. The factory was placed under the control of Oldham-born Hirst. At first, the plan was to use it for military vehicle maintenance. Since it had been used for military production, and had been a "political animal" (Hirst's words) rather than a commercial enterprise, the equipment was in time intended to be salvaged as war reparations. Hirst painted one of the factory's cars green and demonstrated it to British Army headquarters. Short of light transport, in September 1945 the British Army was persuaded to place a vital order for 20,000. The first few hundred cars went to personnel from the occupying forces, and to the German Post Office. By 1946 the factory was producing 1,000 cars a month, a remarkable feat considering the factory was still in disrepair: the damaged roof and windows meant rain stopped production; the steel to make the cars had to be bartered for new vehicles.

The car and its town changed their Second World War-era names to Volkswagen and Wolfsburg respectively, and production was increasing. It was still unclear what was to become of the factory. It was offered to representatives from the British, American and French motor industries. Famously, all rejected it. After an inspection of the plant, Sir William Rootes, head of the British Rootes Group, told Hirst the project would fail within two years, and that the car "is quite unattractive to the average motorcar buyer, is too ugly and too noisy ... If you think you're going to build cars in this place, you're a bloody fool, young man." (In a bizarre twist of fate, Volkswagen would manufacture a locally built version of Rootes' Hillman Avenger in Argentina in the 1980s, long after Rootes went bust at the hands of Chrysler in 1978—the Volkswagen Beetle outliving the Avenger by over 30 years).

Ford representatives were equally critical: the car was "not worth a damn." Henry Ford II, the son of Edsel Ford, did reportedly look at the possibility of taking over the VW factory but dismissed the idea as soon as he looked up Wolfsburg on the map. . . and found it to be too close for comfort to the East German border. In France Citroën started the 2CV on a similar marketing concept. In Italy it was the Fiat 500.

1948–1974: Icon For German Regeneration

From 1948, Volkswagen became a very important element, symbolically and economically, of West German regeneration. Heinrich Nordhoff (1899–1968), a former senior manager at Opel who had overseen civilian and military vehicle production in the 1930s and 1940s, was recruited to run the factory in 1948. In 1949 Hirst left the company, now re-formed as a trust controlled by the West German government. Apart from the introduction of the Volkswagen Type 2 commercial vehicle (van, pickup and camper) and the Volkswagen Karmann Ghia sports car, Nordhoff pursued the one-model policy until shortly before his death in 1968.

Volkswagens were first exhibited and sold in the United States in 1949. On its entry to the U.S. market, the VW was briefly sold as a "Victory Wagon". Volkswagen of America was formed in April 1955 to standardize sales and service in the U.S. Production of the Type 1 Volkswagen Beetle (German: 'Käfer', US: 'Bug', Mexican: 'Vocho', 'Vochito', French: 'Coccinelle', Portuguese: 'Carocha', Brazilian: 'Fusca',Colombian & Venezuelan: 'Escarabajo' Danish: 'Boble, Folkevogn', Polish: 'Garbus', Croatian: 'Buba', Swedish: 'Bubbla, Folka') increased dramatically over the years, the total reaching one million in 1954. Despite the fact it was almost universally known as the Beetle, it was never officially known as such, instead referred to as the Type 1. The first reference to the name Beetle occurred in U.S. advertising in 1968, but it was not until 1998 and the Volkswagen Golf-based New Beetle would the name be adopted by Wolfsburg.

During the 1960s and early 1970s, although the car was becoming outdated, American exports, innovative advertising and a growing reputation for reliability helped production figures to surpass the levels of the previous record holder, the Ford Model T. By 1973 total production was over 16 million.

VW expanded their product line in 1967 with the introduction of several Type 3 models, which were essentially body style variations (Fastback, Notchback, Squareback) based on Type 1 mechanical underpinnings, and again in 1969 with the relatively unpopular Type 4 (also known as the 411 and 412) models, which differed substantially from previous models with the notable introduction of unibody construction, a fully automatic transmission, electronic fuel injection, and a sturdier powerplant. Volkswagen added a "Super Beetle" (the Type 113) to its lineup in 1971. The Type 113 differed from the standard Beetle in its use of McPherson strut front suspension instead of torsion bars. The McPherson suspension added valuable trunk space and widened the front end. Despite the Super Beetle's popularity with Volkswagen customers, purists preferred the standard Beetle with its less pronounced nose and its original torsion bar suspension. In 1973, Volkswagen introduced the military-themed Thing (Type 181) in America, recalling the wartime Type 81. The military version was produced for the NATO-era German army (Bundeswehr) during the cold war years of 1970 to 1979. The US Thing version only lasted two years, 1973 and 1974, due at least in part to Ralph Nader's automobile safety campaigns.

1974: From Beetle to Golf

Volkswagen was in serious trouble by the end of the 1960s. The Type 3 and Type 4 models had been comparative flops, and the NSU-based K70 also failed to woo buyers. The company knew that Beetle production had to end one day, but the conundrum of replacing it had been a never-ending nightmare. The key to the problem was the 1964 acquisition of Audi/Auto-Union. The Ingolstadt-based firm had the necessary expertise in front wheel drive and water-cooled engines that Volkswagen so desperately needed to produce a credible Beetle successor. Audi influences paved the way for this new generation of Volkswagens, known as the Volkswagen Polo, which actually was rebaged Audi 50, Volkswagen Golf and Volkswagen Passat.

Production of the Beetle at the Wolfsburg factory switched to the VW Golf in 1974, marketed in the United States and Canada as the Volkswagen Rabbit in the 1970s and as the Golf in the 1980s. This was a car unlike its predecessor in most significant ways, both mechanically as well as visually (its angular styling was designed by the Italian Giorgetto Giugiaro). Its design followed trends for small family cars set by the 1959 Mini and 1972 Renault 5—the Golf had a transversely mounted, water-cooled engine in the front, driving the front wheels, and had a hatchback, a format that has dominated the market segment ever since. Beetle production continued in smaller numbers at other German factories (Essen) until 1978, but mainstream production shifted to Brazil and Mexico.

From 1970s to present

While Volkswagen's range of cars soon became similar to that of other large European car-makers, the Golf has been the mainstay of the Volkswagen lineup since its introduction, and the mechanical basis for several other cars of the company. There have been five generations of the Volkswagen Golf, the first of which was produced from the summer of 1974 until the end of 1983, sold as the Rabbit in the United States and Canada and as the Caribe in Latin America. Its chassis also spawned the Volkswagen Scirocco coupe and Volkswagen Jetta sedan. The production numbers of the first generation Golf has continued to grow annually in South Africa with only slight modifications to the interior, engine and chassis. The second generation Golf/Jetta sedan ran from late 1983 to late 1991. In 1991, Volkswagen launched the third-generation Golf, garnering the European Car of the Year for 1992 (the previous two generations were nominated but lost to the Citroën CX in 1975 and the Fiat Uno in 1984). The sedan version of the Golf was badged Vento in Europe (but remained Jetta in the USA, where its popularity outstripped the Golf).

The fourth incarnation of the Golf arrived in late 1997, its chassis spawned a host of other cars within the Volkswagen group—the Volkswagen Bora (the sedan, still called Jetta in the USA), VW New Beetle, SEAT Toledo, SEAT Leon, Audi A3, Audi TT and Skoda Octavia. However, it was beaten into third place for the 1998 European Car of the Year award by the winning Alfa Romeo 156 and runner-up Audi A6. The current Volkswagen Golf was launched in late 2003, came runner-up to the Fiat Panda in the 2004 European Car of the Year, and has so far spawned the new generation SEAT Toledo, Skoda Octavia and Audi A3 hatchback ranges as well as a new mini-MPV, the SEAT Altea. The fifth-generation Golf is now available in Europe, and the GTI boasts a 2.0 L Turbo-charged direct injection engine. When it goes on sale in the U.S. and Canada in 2006, the fifth-generation Golf will once again bear the Rabbit nameplate. The fifth-generation Jetta, and the performance version, the GLI, are currently available in the United States and Canada.

The other main models have been the Polo, a smaller car than the Golf, and the larger Passat for the segment above the Golf. As of 2005, there have been four incarnations of the Polo: Mk 1 (1976), Mk 2 (1981, facelifted 1990), Mk 3 (1994, facelifted 1999) and the current Mk 4 (2002). The Scirocco and Corrado were both Golf-based coupés.

In 1998, Volkswagen launched the J Mays-designed the Concept One, a "retro"-themed car with a resemblance to the original Beetle but based on the Golf chassis. Its genesis was secret and in opposition to VW management, who felt it was too backward-looking. Management could not deny the positive public response to the concept car and gave the green-light to its development as the New Beetle. It has been quite popular in the USA, less so in Europe.

In 2002, Volkswagen announced two models taking it into market segments new to the company: the Phaeton ("Fay-ton") luxury car, and the Touareg ("Two-ah-regg") SUV. The Phaeton was critically acclaimed but not well received in the marketplace. In 2005 VW announced its discontinuance in the US market for fall 2006, mainly due to the disappointing sales there and the need for major investments in the car's line of engines (W12 and V8) to meet new emission requirements. Also, Volkswagen has faced harsh criticism that the Phaeton had used up money that was better invested in their smaller cars. After rising significantly between 1998 and 2002, VW's North American sales began to fall sharply leading to a 2005 loss of roughly $1 billion (U.S.) for its operations in the U.S. and Canada. The reliability of the company's cars appears to bear some of the responsibility for this situation. By the early 2000s, its models sat near the bottom of Consumer Reports and J.D. Power reliability rankings.

Volkswagen is still in better position in North American market than it was in the early nineties, when its U.S. sales plummeted to 49,533 units in 1993. Despite its current reliability problems, the company hopes to remain competitive in the U.S. and Canada with several new models. Ahead of the new Rabbit, the fifth-generation GTI is already on sale in North America and has generated interest among the VW faithful with its "Make friends with your fast" and "Unpimp My Ride" advertising campaigns. And although its reliability remains to be determined, the GTI was named by Consumer Reports as the top sporty car under $25,000. Volkswagen is also adding the Eos, a sport coupe with a convertible hardtop, to its U.S./Canadian lineup as well. All of these cars are being made in Germany for the North American market instead of at VW's South American factory, where Golfs and Jettas for the United States and Canada have been made in the past.

Power and Associates ranked VW 35th out of 37 bands in its initial quality survey. Attempts to enter a new market segment also compromised Volkswagen's standing in North America. In 2002, Volkswagen announced the debut of its Phaeton luxury car, which was critically acclaimed but not well received in the marketplace. VW announced its discontinuance in the U.S. market for the 2007 model year due to the disappointing sales.

On July 15, 2008 however, Volkswagen announced that they will construct an automobile assembly plant in Chattanooga, Tennessee. This plant will produce cars specifically designed for North America beginning with the New Midsize Sedan, which will be more competitive with North American market leaders Toyota Camry and Honda Accord. Production is scheduled to begin in early 2011 and is expected to end more than five years of losses in the world's largest auto market.

Volkswagen currently offers a number of its vehicles with an advanced, light duty diesel engine known as the TDI (Turbo Direct Injection). Whilst extremely popular in the European market, light duty diesels do not yet enjoy the same wide acceptance in the American marketplace, despite increased fuel economy and performance comparable to gasoline engines due to turbocharging. According to the U.S. Environmental Protection Agency, 4 of the 10 most fuel efficient vehicles available for sale in the U.S. in 2004 were powered by Volkswagen diesel engines. They were a three-way tie for 8th (TDI Beetle, TDI Golf, TDI Jetta) and 9th, the TDI Jetta Wagon. Sales of light duty diesel engine technology are increasing as gasoline prices rise. Products such as the Toyota Prius might have highlighted the economy of non-gasoline engines, but in reality, a Volkswagen TDI engine is often found to be more efficient than the Prius on the highway (although not so when driving in the city). In addition, all VAG TDI diesel engines produced since 1996 can be driven on 100% biodiesel.

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