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Volkswagen To Produce New Compact Car: Dot-Com Boom To Bankruptcy To Reorganization

Volkswagen AG's new chief executive said the automaker plans a new compact model and does not foresee impending job cuts. Martin Winterkorn, former head of Audi division, became Volkswagen's CEO this year, and has since taken over the company's core VW brand.

According to Winterkorn, shortly after taking office, he proposed the "design and development of a new, very small, model below the Fox." Winterkorn described the compact as "an economical, everyday small car that looks attractive and is affordable." The said new compact will be engineered to cater to a diverse market around the globe. Winterkorn added that unlike DaimlerChrysler AG's ultracompact Smart, it would have "space for four people plus luggage."

DaimlerChrysler AG's Smart is a compact car that boasts a bunch of advantages like easy to park built that allows "nose-in" parking. Smart Fortwo idea was supported by Swatch, a Swiss watch manufacturer hence the code "Swatchmobile." Later, the name was altered to SMART, short for Swatch Mercedes ART. The function of the car is to transport two people and few luggages.

The production of the final Smart car was costly; the primary cause is the engine technology used aside from the distinct cold air intake. As a fact, it was more expensive than other four and five seater cars sold in Europe. This is the very reason why the joint venture experienced heavy losses. Eventually, Swatch pulled out from the business venture.

In 2005, DaimlerChrysler decided against purchasing a 50 percent share in the NedCar plant that produces Forfour supermini. The automaker ceased development on the Formore and discontinued Roadster. Last year, after experiencing slow sales, the company announced the cancellation of Forfour and the redesign of Fortwo, set to be unveiled in Europe this year.

Volkswagen, a German Wolfsburg-based automaker, is in the process of enforcing its own restructuring plan that includes the cutting of up to 20,000 jobs, trimming production expenses and implementing extended working hours at its German plants. The restructure program was introduced by Bernd Pischetsrieder, previous CEO of the company. The said introduction was made in a bid to compete with Asian automakers which have been making steady success in the global market. This automaker resorted to this strategy in an effort to have a bigger piece of the American auto market.

According to the Sueddeutsche Zeitung, a German newspaper, Winterkorn indicated that the company did not plan further cuts beyond that. "We need the team in its current strength in order to realize additional projects that we are getting started now," Winterkorn said. Among those projects, "there will definitely be a hybrid propulsion for cars in the compact class such as the Polo and Golf -- as quickly as possible," he added. Winterkorn, chief of VW AG, confirmed that the extra production of the new compact model could avoid further job cuts.

Volkswagen, one of the biggest automakers around the world, has popular brands like Audi, Bentley, ?koda, Lamborghini, SEAT and the brand Volkswagen itself, which was founded in 1937. Volkswagen compact cars use the A platform, which was originally based on Golf's architecture and is adjustable to either front- or all wheel drive configurations. .

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