Volkswagen AG said yesterday that it will pull its pricey Phaeton sedan from the U.S. market in February, delivering a new blow to the embattled chairman of its supervisory board, Ferdinand K. Piech.
Piech championed the development of the Phaeton while he was chief executive, from 1993 to 2002, and he envisioned the car as the centerpiece of an ambitious strategy to turn VW into more of a luxury-car maker.
Piech's "strategy of moving the brand more up-market was flawed," said Stephen Cheetham, an analyst with Sanford C. Bernstein Ltd. in London. The withdrawal of the Phaeton from the United States less than three years after its launch "is a tacit admission that that strategy is in disarray."
The Phaeton's demise in the United States occurs as Piech has come under criticism for apparent conflicts of interest. He recently backed a purchase of a 20 percent stake in Volkswagen by Porsche AG, a company controlled by his family. He is the grandson of Ferdinand Porsche, founder of the sports-car maker.
Through his family, he also owns part of Porsche Holding Salzburg, an Austrian company that distributes vehicles made by Volkswagen's VW, Audi, Skoda and Seat brands in Eastern Europe and elsewhere.
Piech could not be reached for comment.
Last month, after the release of a VW-commissioned report by J.P. Morgan on the conflict-of-interest question, other members of the supervisory board pressured Piech to resign. But labor representatives on the board backed the chairman, and he kept his seat.
The decision to pull the Phaeton out of the United States, the world's largest auto market, is the latest sign of trouble for Volkswagen's North American business, which has racked up $960 million in losses in the first nine months of the year.
Volkswagen of America Inc. spokesman Tony Fouladpour said the Phaeton, which sells for between $68,000 and $104,000 and was launched in the United States in 2003, "fell a little bit short of our expectations."
Although VW officials have said Volkswagen plans to continue working on a new version of the Phaeton, Cheetham said the economics of building the Phaeton "look more dubious" if Volkswagen takes the car out of the U.S. market.
The company spent nearly $1.17 billion to build the factory where the car is made in Dresden, Germany, a glass-and-steel edifice so impressive that the town's opera company once used it when the local opera house was flooded. The "glass factory," as it is known, was another pet project of Piech's, but it operates at a fraction of its potential capacity.
Last year, Volkswagen sold around 7,000 Phaetons worldwide. Originally, VW had expected to sell about 20,000 a year and to compete with the world's most established luxury sedans, such as the Mercedes S-Class, the BMW 7-Series and the Audi A8 of Volkswagen's own luxury unit, Audi AG.