Browning out as head of VW of America; Michael Horn named president and CEO

Browning: Leaving for personal reasons.
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Jonathan Browning has been replaced as CEO of Volkswagen Group of America, capping a year of struggle for the German brand in the United States.

Michael Horn, 51, will take over for Browning, 54, as president and CEO of the company’s U.S. arm on Jan. 1, VW said today. Horn, who joined VW in 1990, has been head of Volkswagen Global After Sales since 2009.

Browning, a former Ford and General Motors executive, joined VW in 2010. VW said he is leaving the company for personal reasons and is returning to the United Kingdom.

“This is an opportune time to implement these changes in our leadership structure as the brand is between major product launches and is preparing for the next phase of growth for the VW brand in the U.S.,” VW said today in a letter to U.S. dealers that was obtained by Automotive News. “The progress made over the past several years gives VW a much stronger platform in the U.S. market.”

Up, up, not so up

Browning steered the U.S. unit to a 23 percent gain in 2011 and a 30 percent advance in 2012. The VW brand alone sold nearly 440,000 units in 2012, up 35 percent and twice what it had sold three years earlier, putting it on pace to meet its sales goal of 800,000 units in 2018.

But through November this year, sales of VW, Audi, Porsche and Bentley models are up 1 percent in a market that’s risen 8 percent, turning one of the fastest growing brands in the U.S. market into one of the few that is losing ground. VW-brand sales are off 5 percent.

Sales of the namesake VW brand have fallen eight straight months, partly due to a lack of new products -- particularly in the compact and mid-sized SUV segments, where VW’s existing offerings tend to be more expensive than the competition.

It has put substantial pressure on Browning, who has insisted that sales will recover once a new wave of products arrives.

“From our point of view, we’re setting a new baseline, and with future investment, we’re certainly confident in growth for the future,” he told reporters in early December during the VW brand’s monthly sales call.

‘Stronger voice’

Volkswagen AG has set a goal of selling 800,000 VW-brand vehicles in the United States by 2018, built around four models designed for U.S. customers: a compact sedan, a mid-sized sedan, a compact SUV and a mid-sized SUV.

Two of those models -- the redesigned Jetta compact sedan and Passat mid-sized sedan -- are on the market and selling far better than their predecessors. Delivering the SUVs will be one of Horn’s prime directives.

Michael Horn

Horn’s background pleases U.S. dealers such as Alan Brown, a VW dealer in Texas and a member of the brand’s U.S. dealer council.

Brown and his partners are investing $21 million to build a second VW dealership in Frisco, Texas, in the outer ring of the Dallas suburbs, where SUVs are a must-have product in showrooms.

He said he thinks Browning has done a commendable job as CEO, but having a German like Horn leading the organization could now help U.S. executives make a case for SUVs and other new products.

“Volkswagen AG has a hard time releasing the reins to Volkswagen in America. There’s no secret there,” Brown said. “I think that with Browning being replaced by a German colleague -- that might give us a stronger voice.”

Horn has a background developing products. Earlier in this career, he helped to launch the VW brand’s Phaeton luxury sedan and Touareg luxury SUV, the latter of which has become a mainstay of the VW lineup in the United States.

U.S. struggles

Browning has also struggled to quell dissatisfaction this year among VW dealers, whose profit margins have shrunk as sales have declined and the automaker has made more demands to improve customer satisfaction.

The VW brand also has not managed to use the full capacity of a $1 billion assembly plant that opened in Chattanooga in 2011. In April, after it became clear the Passat sedan was not selling well enough to use the plant’s full capacity of 180,000 cars per year, VW switched from three teams to two, laying off 500 contract workers.

Through November, Passat sales in the United States have fallen 2 percent to 100,398.

Browning and other U.S. executives have asked to upgrade the assembly line at the Chattanooga plant, boosting its capacity to about 250,000 units per year. That would make enough room to build a mid-sized SUV similar to the CrossBlue concept shown at the Detroit auto show earlier this year. It would provide VW with a competitor to larger SUVs like the Ford Explorer and Toyota Highlander.

VW has said it will make a decision by year’s end, but no decision has been announced. Dealers are tired of waiting.

“We need it right now,” Jimmy Ellis, who just added a third VW store in the Atlanta metropolitan area, and who chairs VW’s national dealer council, said in an interview this week before VW disclosed Browning’s departure. “We need it today. And any further delay is just delaying what we have to have to compete as a Tier 1 brand in the United States here.

“Volkswagen wants to be there. They expect to be there. They have the resources to be there. And without this vehicle, they’re not going to be.”

You can reach Gabe Nelson at gnelson@crain.com.


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