VW bets on Golf update to bolster brand revival

By Andreas Cremer

WOLFSBURG, Germany (Reuters) - Volkswagen launched a technology-packed updated version of its top-selling Golf hatchback on Thursday to underpin efforts to revive its core brand.

The group's VW brand has suffered from high labor and development costs for years, with the need to improve profitability amplified by the billions of euros in costs the company faces in the aftermath of the emissions-cheating scandal that broke 14 months ago.

While brand and labor bosses are struggling to agree on cost cuts and strategy for the group's biggest division by sales, management aims to refresh the VW brand's model line-up to sustain demand.

Changes brought to the seventh-generation Golf, such as a fully digital dashboard and gesture control technology for the information and entertainment system, are designed to improve the competitiveness of the model until the arrival of a fully redesigned Golf in 2019.

"The Golf represents the essence of the brand better than any other model," Herbert Diess, VW's brand chief executive, told Reuters. "That's why we continuously invest in the technology and improvements of this core product."

Worldwide sales have topped 33 million since the Golf first entered production in 1974. As many as 2,000 are still being built each day at Wolfsburg, helping to safeguard the jobs of the bulk of the plant's production workforce.

Yet the updated Golf, due to hit European dealerships in February, faces a tough battle for buyers.

Research company IHS Automotive expects Golf sales to plunge 14 percent to 753,110 vehicles in 2019 from an estimated 873,033 this year. Sales of Toyota's <7203.T> Corolla model are forecast by IHS to drop 3.3 percent to 1.15 million vehicles while the Ford (NYSE: F) is expected to chalk up a hefty 38 percent increase to 1.01 million vehicles.

"Our brand is facing some pretty big challenges," Diess said at the updated Golf's launch in Wolfsburg. "A new Golf always stands for a new beginning, a new momentum."

The location of Thursday's launch reflected a new-found sense of modesty at post-dieselgate VW. The carmaker picked the plain office tower on its factory grounds to present the new model, breaking with a tradition of choosing exclusive venues for the unveiling of key models.

"It's undeniable that cost discipline has become the name of the game at VW," one senior manager told Reuters at the event.

(Editing by David Goodman)

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