The solution arrived with Auto Union. They had attracted a small following with their technologically advanced Audi front wheel drive medium sedans. Volkswagen had acquired the Ingolstadt-based company in 1964 from Daimler-Benz. Audi's expertise in water-cooled engines and front-wheel drive would be essential in developing a new generation of Volkswagens. FWD offered more performance with lighter weight and more room in a smaller package. The Audi technology in the Golf would regain for Volkswagen the engineering lead over rear drive cars that Ferdinand Porsche had bestowed on the original Beetle over its large conventional peers.
The small Golf had to succeed in replacing the high volume Volkswagen sedan. The upmarket Dasher/Passat would be VW's first front wheel drive car, and it was relatively well received for its lower volume market. The Golf would adopt an efficient "two-box" layout with a steep hatch rather than a formal trunk, which would be later added in the Jetta. The water-cooled engine would be mounted transversely in the front. Work on the Golf began in 1969, shortly after Kurt Lotz became head of Volkswagen. The first Golf (VW internal designation Typ 17) began production in 1974, although it was marketed in the United States and Canada from 1975 to 1984 as the Volkswagen Rabbit and in Latin America as the Volkswagen Rabbit and in Latin America as the Volkswagen Caribe. It was a water-cooled, front wheel drive design in a hatchback body style. The Golf was Wheels magazine's Car of the Year for 1975. The name is short for Golf-Strom, German for Gulf Stream; it was named for that oceanic current to reflect its international character.
The Golf was designed by Italian automobile architect / designer Giorgetto Giugiaro, of the ItalDesign design studio.
In 1978, Volkswagen began producing the North American "Rabbit" version of the Mark 1 Golf in New Stanton, Pennsylvania, thus becoming the first European car manufacturer in modern times to produce a vehicle in the United States. Former Chevrolet executive James McLernon was chosen to run the factory, which was built to lower the cost of the Rabbit in North America by producing it locally.
Unfortunately, McLernon tried to "Americanize" the Golf/Rabbit (Volkswagen executive Werner Schmidt referred to the act as "Malibuing" the car) by softening the suspension and using cheaper materials for the interior. VW purists in America and company executives in Germany were displeased, and for the 1983 model year the Pennsylvania plant went back to using stiffer shocks and suspension with higher-quality interior trim. The plant also began producing the GTI for the North American market. The first VW Caddy pick-up, based on the Mark 1 Golf, was also created at the Pennsylvania plant.
The GTI version, launched in Europe in 1976 and in the U.S. in 1983, virtually created the hot hatch genre overnight, and many other manufacturers since have created special sports models of their regular volume selling small hatchbacks. The idea behind it was rather straightforward - take a basic transportation economy car and give it a high-performance package, making it practical and sporty. It was one of the first small cars to adopt mechanical fuel injection for its sports version, which raised power output of the 1,588 cc engine to 110 PS (81 kW/108 hp).
In 2004, Sports Car International declared the Golf GTI Mark 1 to be the 3rd best car of the 1980s.Source: Wikipedia.