Volkswagen in the 21st century
2006 Volkswagen Phaeton

Volkswagen began introducing an array of new models after Bernd Pischetsrieder became Volkswagen Group CEO (responsible for all Group brands) in 2002. The fifth-generation VW Golf was launched in 2004, came runner-up to the Fiat Panda in the 2004 European Car of the Year, and has spawned several cousins: VW Bora, SEAT León, SEAT Toledo, Škoda Octavia and Audi A3 hatchback ranges, as well as a new mini-MPV, the SEAT Altea. The GTI, a "hot hatchback" performance version of the Golf, boasts a 2.0 L Turbocharged Fuel Stratified Injection (FSI) direct injection engine. VW began marketing the Golf under the Rabbit name once again in the U.S. and Canada in June 2006. (The GTI had arrived to North America four months earlier). The fifth-generation Jetta, and the performance version, the GLI, are also available in the United States and Canada. The sixth-generation Passat and the fifth-generation Jetta both debuted in 2005, and VW has announced plans to expand its lineup further by bringing back the Scirocco by 2008. Other models in Wolfgang Bernhard's (Volkswagen brand CEO) "product offensive" include the Tiguan mid-sized SUV in 2008 and a Passat Coupé. In November 2006 Bernd Pischetsrieder announced his resignation as Volkswagen Group CEO, and was replaced by Audi worldwide CEO Martin Winterkorn at the beginning of 2007. Winterkorn is credited with making Audi a challenger to the dominance of BMW and Mercedes, and his design-led strategy has led to Audi being considered one of the most important brands in the world. It remains to be seen how Winterkorn's focus on design shapes the Volkswagen brand's future. Nevertheless, Volkswagen continues to have complicated relations with both unions and shareholders. The German state of Lower Saxony owns significant stock in VW, as does sportscar manufacturer Porsche.
The B5.5 fifth-generation Passat facelift

In North America, VW faced many challenges. After rising significantly between 1998 and 2001, VW's North American sales began to fall sharply leading to a 2005 loss of roughly US$1 billion for its operations in the U.S. and Canada. Profitability has not been strong, and the lack of reliability of the company's cars appears to bear some of the responsibility for this situation. By 2005, its models sat near the bottom of Consumer Reports reliability ratings, and J.D. 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.