VW Comeback Story: Regaining Trust

Mark Maynard
Fri, 02 Dec 2016 21:00:00 -0800
Lifestyle

Last week, during the press days of the ongoing Los Angeles Auto Show, I participated in a select roundtable discussion with two of Volkswagen's top U.S. executives. Hinrich J. Woebcken is the CEO of the North America region, and Dr. Matthias Erb is executive vice president of the North American Engineering and Planning Center in Chattanooga, Tennessee.

It was a candid discussion. While a public apology is not likely, the company is well aware of its immediate need to regain trust. It must repair relations not just with Volkswagen owners but with all automotive consumers who feel affronted by corporate dishonesty and the company's use of emissions-cheating software for its diesel engines.

Woebcken outlined several strategies to make the brand more favorable. He talked of improved reliability, new vehicles and better communication in the U.S., and more independence from headquarters in Wolfsburg, Germany.
Updated: Fri Dec 16, 2016

Last week, during the press days of the ongoing Los Angeles Auto Show, I participated in a select roundtable discussion with two of Volkswagen's top U.S. executives. Hinrich J. Woebcken is the CEO of the North America region, and Dr. Matthias Erb is executive vice president of the North American Engineering and Planning Center in Chattanooga, Tennessee.

It was a candid discussion. While a public apology is not likely, the company is well aware of its immediate need to regain trust. It must repair relations not just with Volkswagen owners but with all automotive consumers who feel affronted by corporate dishonesty and the company's use of emissions-cheating software for its diesel engines.

Woebcken outlined several strategies to make the brand more favorable. He talked of improved reliability, new vehicles and better communication in the U.S., and more independence from headquarters in Wolfsburg, Germany.

The Volkswagen Group is a multinational juggernaut with a brand stable including Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT and Skoda. The group also owns Ducati motorcycles and builds commercial trucks and buses under such names as MAN and Scania.

In global auto sales last year, VW Group was behind top-selling Toyota and ahead of General Motors. That changed overnight in mid-Sept. 2015, when the Environmental Protection Agency and the California Air Resources Board issued official notices of violation, making the diesel scandal public and stopping sales of its diesel-powered vehicles.

VW lost 25 percent of its sales with that announcement. But the good news, Woebcken said, was that "we are now 'only' down 13 percent" in the U.S. The key has been converting traditional diesel customers to petrol, said Woebcken, who was brought in from BMW to lead a restructured North American operation and steer a U.S. turnaround.

The comeback story has already begun. The North American region has been given stronger independence, which he noted is reflected in the name of the upcoming three-row crossover, the Atlas. In other parts of the world (including Canada), VW's largest vehicle is known as Terramont.

Atlas (perhaps symbolically carrying the weight of Volkswagen on it shoulders) goes on sale in the spring. It's also a second phase of the comeback story, to build product momentum. Atlas will be in one of the most popular vehicle segments in the U.S.: the midsize family-class seven-passenger car-based SUV.

Woebcken said of Atlas: "It's a great package with the best third-row seats. We worked hard on driver sightlines by engineering super slim A pillars (at the windshield), the best of all competitors. It is simply a beautiful car. If you look into the face of this car, it is a Volkswagen." Pricing won't be announced for two months, but it will be competitive, a change to the previous pricing strategy.

Atlas will be built in Tennessee along with the midsize Passat sedan, which has been an underachiever in the lineup. A redesigned model debuted last year, but it was lost in the midst of the diesel scandal.

"We are taking measures to get Passat back on track," he said, and pointed to the Passat GT concept, which was unveiled at the L.A. show. The performance-themed concept, created by VW's engineering and planning center in Chattanooga, has a 280-horsepower V-6 engine and more than 20 design changes from the standard Passat. The concept was based on feedback from U.S. customers and dealers.

"We must be careful in customer expectations," Dr. Erb said, promising faster updates to vehicles.

The sportiness of Volkswagen works in the U.S. and will continue to do so, said Woebcken. The Golf R sells as fast as it is delivered to dealers. "Part of the independence of this market is having the right product lines in the various regions of the U.S.," he said. "We need volume to get the business case going."

And of course, new product is always necessary to grow sales. Erb said VW wants to catch up in the subcompact SUV segment, possibly a vehicle between the Golf Alltrack wagon and the compact Tiguan SUV. Sizewise, it might be compared to the Chevrolet Trax or Ford EcoSport (also revealed at the L.A. show).

Volkswagen also has an eye on getting back into the pickup truck segment, but with a midsize vehicle, not a full-size truck. The globally sold Amarok is up for a redesign, and its successor could be brought to the U.S. (But please, let it be brought with a new name.) And a van is in the plan, too, though not a microbus re-creation.

Don't expect any new diesel models before 2018. Even then it will be on a package-by-package consideration, for "It takes money to keep up with the (diesel) standards," Woebcken said. And right now the company is spreading investment costs in too many places.

Much of that investment is going toward electric vehicles. Thirty of them are planned globally by 2025. Woebcken called it a zero-compromise electronic vehicle plan.

"We don't believe long term that you can electrify gas-engine cars," he said. "Instead we are focusing on our MEB platform (Modular Electric Toolkit)." The company is also looking at partnering with a battery company and EV components suppliers.

For gasoline passenger cars, hybrids and plug-in hybrids, VW uses its Modular Transverse Toolkit, or MQB. Both toolkits are handy to create a range of vehicle sizes to be built from one basic architecture. "Volkswagen is really good at scale to achieve a great price position," said Woebcken. "That's where we are No. 1."

He acknowledges with some humility that there was a big disappointment: "We want to do things right with remedies for TDI (the diesel scandal). The great thing about America is that you guys give people who did a mistake a second chance."

The bigger challenge could be convincing Europe that Volkswagen has learned its lesson. It is not a forgiving marketplace.

Then, perhaps, an apology to all should be the first strategy.

Mark Maynard is online at mark.maynard@sduniontribune.com. Find photo galleries and more news at Facebook.com/MaynardsGarage. To find out more about Mark Maynard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.