I'm not sure what to make of the "City" concept. Personally I find it distasteful, however all that matters to VW is sales. I can't see it as being helpful for brand prestige. Sure, you will rob sales from the used market, but how many of your current customers will you 
off by destroying the resale value of their Mk IV Golfs and Jettas? To me, this smacks simply of profiteering and a disregard for customer loyalty and brand image. As an auto maker, you should always push to putting your best foot forward on the showroom floor, not leftovers cobbled together from the spare parts bin. When you have something better, you offer it and leave the past behind.
These cars will cater to the market where the lowest cost is the bottom line and most significant criteria. If VW wants to water down its brand by scrapping it out with the Cobalt and Aveo, they can go right ahead. As a brand that promotes itself as oriented towards enthusiasts and "drivers", I say it is a risky move in watering down brand equity. As for the cars themselves...nothing much bad to say about them except that they are very much outdated. Just because the concept may work in South Africa does not mean it is good to apply it in Canada. Our choices are very much driven by brand image and this could stand to hurt VW's most profitable market. Then again, if they keep the Citys shoved to the back of the showroom and get you drooling over the GTI, a lot can be forgotten in a short span of time.
If I were a VW exec, I would have vetoed this simply out of principle. In the end however, they likely will stand to make extra dollars out of the deal and leave the ideals out of it. If my trade in value on my MK IV Jetta or Golf was destroyed by this move however, I'd be looking to switch brands when it came time for something new.
Offering an entry-level vehicle hurts brand prestige?
Certainly buyers of the old Golfs and Jettas are going to be hit by resale, but that happens whenever an automaker brings out a new model. I don't understand how you can argue that it will dilute the brand image - the last-gen Golf/Jetta were great cars. Indeed, some VW fans prefer the last-gen Jetta to the new one.
Canadian choices are hardly driven by brand image, either. Canadian drivers are, by and large, sensible. That's why there are so many Civics, Corollas, Cobalts, etc. on the road. Hardly 'prestige' cars. In fact, I would wager that to the average joe, the City Jetta will have more 'prestige' than a Civic.
Because there is nothing at all wrong with the City cars. Sure, it's older technology than what's new models, but what's that famous saying? 'If it aint broke, don't fix it.'
Where's your condemnation of the Honda Fit? It's a 2000 model, is it diluting brand image? Is it a travesty on our roads? What about the Infiniti G35. The VQ in that engine dates back 12 years.
What you seem to fail to grasp is that car manufactures exist to make money. They are profitable enterprises. This move will certainly put more money in VW's pockets. Some people will get very capable, very nice cars, brand new, with warranty, for a great price.
Who, exactly, is the loser in that equation?
