VW tries to hit ‘reset’ in U.S.
Seattle – One year after Dieselgate buried Volkswagen under costly litigation and consumer distrust, the company is reintroducing itself to U.S. buyers with new vehicles, new management, a new philosophy – and an abandonment of diesel.
The German automaker’s strategy took form this week with the launch of its first new vehicle, the 2017 Golf Alltrack wagon, since the cheating scandal broke last September.
“The Alltrack is the beginning of the journey making the brand more family-oriented, more fun-to-drive, and also more smart-to-own. It is the beginning of a positive journey for this brand,” said Hinrich Woebcken, 55, who began in April as CEO for VW Group North America. “Me and my team are intending to take this negative perception which is in the market because of (diesel) right into a positive momentum.”
Notably, diesel is no longer on the menu.
“We are transitioning away from diesel to electric vehicles,” said Woebcken, an outsider who comes to VW after 10 years at BMW. “Regulations have made diesel harder to do in the U.S. market anyway.”
The Golf Alltrack, a “ruggedized” version of VW’s SportWagen, is powered by a turbocharged 1.8-liter gas engine. Woebcken says the all-wheel drive Alltrack, which rides nearly an inch higher than the SportWagen, is representative of the brand’s shift from “a compact car company to a bigger car company” featuring more all-wheel drive models. As part of the brand’s realignment, the SportWagen, too, will get an AWD option.
The most important product in VW’s relaunch, however, will come in the second quarter of next year when VW unveils a midsize three-row SUV.
“It is in the middle of ramp-up in Chattanooga,” said Woecken, referring to VW’s Tennessee assembly plant which makes the Passat sedan. “This product is going to be a splash. It is a great seven-seater – the biggest Volkswagen SUV ever. This product is designed into the heart of the U.S. market.”
VW will follow the as-yet-to-be-named sport ute – which debuted at the Detroit Auto Show in 2013 as the CrossBlue concept – two months later with a long-wheelbase version of its compact crossover Tiguan. A redesigned Jetta sedan will follow.
Karl Brauer, a senior analyst with Kelley Blue Book, said, “Last year’s VW emissions issue has damaged diesel’s image and all but eliminated that customer base. It will be a long road, but the new Alltrack – and strong focus on SUVs and EVs to meet customer and government demands – is a glimpse of where Volkswagen needs to go as an automaker.”
The shift in product emphasis will parallel a shift in responsibility to U.S. operations which gives it more independence from its corporate parents in Wolfsburg, Germany.
“With my arrival (in the U.S.) we decided to govern all activates in North America under one governance, so to speak,” said Woebcken. “We have factories, engineering centers, procurement, sales and marketing in the region – all these activities are under one umbrella now. And this is new.”
“In the past there was a direct reporting line of each function back to HQ where things were put together,” he continued. “The company feels that it is very important to get closer the customers, closer to the dealers.”
The strategy echoes the successful efforts of Volkswagen Group’s luxury brand Audi to build U.S. brand independence in 2005. That was done under the leadership of Johan de Nysschen, now Cadillac’s president. Audi has since set U.S. sales records for 68 straight months as a full-line seller of all-wheel drive luxury SUVs and sedans.
Volkswagen’s relaunch in Seattle was no accident. The brand covets the active, outdoorsy customers here who have made all-wheel drive niche brands like Subaru, a popular lifestyle choice. The Alltrack will be aimed squarely at Subaru’s Outback and Crosstrek AWD wagons. Once popular in the U.S. market, VW – the No. 2 brand in sales globally behind Toyota – saw U.S. sales plummet to less than 350,000 last year, well below smaller Subaru’s 582,675. Sales have continued to take a hit this year with only 29,384 units sold in August – a decline of 9 percent over 2015.
Answering criticism that VW models have been overpriced, the Alltrack will debut at $26,670 – comparable to the Outback but with more standard features like heated seats and leatherette seats.
VW’s product and organizational news comes in addition to big financial commitments to rebuild trust here. VW has agreed to pay $16.5 billion in fines and settlements, including $10 billion to buy back or modify diesel products owned by U.S. customers who may feel betrayed by the brand’s claim to clean diesels. VW has been banned from selling diesels since last September.
Also included are $2.7 billion into an environmental trust fund, and $2 billion for the next decade into electric vehicle infrastructure. “Electrifying America for more electric mobility is a huge commitment which is going to be beneficial for the whole country, for all consumers, for the whole nation,” said Woebcken.
Determined to use Dieselgate as a teachable moment, VW says it will invest $7 billion in U.S. operations by 2019. Part of that investment has gone to Puebla, Mexico, where the Alltrack – due on dealer lots in October – is built.
“A global brand like Volkswagen cannot rely on success in Europe, Germany or China,” said Woebcken. “We need this strong market in the U.S. We employ 6,000 people in North America, and that will grow.”
Henry Payne is auto critic for The Detroit News. Find him at email@example.com or Twitter @HenryEPayne.