• by Karl Greenberg , April 8, 2009

Stefan Jacoby, president and CEO of Volkswagen Group of America and chair of the Alliance of Auto Manufacturers, put an optimistic spin on a market that he concedes is heading toward a 10-million-unit year -- the worst since the 1980s.

As the New York International Auto Show's keynote speaker on Wednesday, he argued that hard times mean greater innovation and that the auto industry will come out of the woods stronger and more diverse.

The auto industry, he said, is "the largest manufacturing base and among the largest investors in research and development. Hard times drive innovation. You can see it this year, with a new focus at this year's show on alternative fuels and sustainable mobility."

Jacoby said that while automakers have made fuel economy a top priority, the answers are not -- in the short term -- about radical technologies, but incremental changes to what exists now. This is not a surprise, since VW and other European automakers are bringing record numbers of clean diesel vehicles to the U.S. market this year.

"The day will come when we will be liberated from fossil fuel, but that day is years away," he said. "Internal combustion engines are benefiting from clean diesel and optimized gasoline, and these improvements come without massive investments." The new Jetta TDI diesel car gets 58 mpg. "We should have cars getting up to 70 mpg in the next 10 years," he said.

With a 2% market share in the U.S. and some 540 dealers, Volkswagen is investing in new production facilities in Chattanooga, Tenn. and hoping to boost stand-alone dealership numbers to around 600, Jacoby said.

"We have a heritage here, an essence that we have to turn into sales. We want to be a bigger player in the U.S., but we don't do it by copying mainstream automakers."