VW's Horn hits reset button with U.S. dealers

Michael Horn, the CEO of VW Group of America, right, greets Richard Sharp of Fred Beans VW, Devon, Pa., after the VW make meeting in New Orleans on Sunday. Photo credit: JOE WILSSENS

UPDATED: 1/26/14 8:06 pm ET - adds detail

NEW ORLEANS -- Michael Horn, the new CEO of Volkswagen Group of America, has a message for VW dealers: We're listening.

In his first major speech to a U.S. dealer body that has grown frustrated about shrinking profits and strict new factory requirements, Horn's team unveiled a broad overhaul of the brand's U.S. sales and marketing strategy -- and drew frequent applause from an audience that had arrived somewhat uneasy.

Among the big changes promised at Sunday's make meeting were an end to stair-step incentives for dealers, a bigger budget for local advertising, and a shift from humorous advertising to more tactical, sales-focused messaging.

Horn's initiatives come after VW division sales fell 7 percent last year in a U.S. market that gained 8 percent. Horn this month took charge of the U.S. operation for the departed CEO Jonathan Browning. Then last week VW also parted ways with Frank Trivieri, 51, who since 2011 had been the Volkswagen brand's U.S. executive vice president of sales.

Dealers interviewed after the Sunday meeting were upbeat, saying the changes will help U.S. dealers propel Volkswagen toward its goal of selling 800,000 units in the United States by 2018. Volkswagen has nearly doubled its annual sales since 2009 to more than 400,000 units, thanks to increased sales of the Jetta and Passat sedans.

"They took the handcuffs off," said Mike Sullivan, a Volkswagen dealer in Santa Monica, Calif. "They've made it so difficult over the last couple of years to do business, period, that the simplification of all that was a big deal. Now we have to see what it means."

Jimmy Ellis, a dealer from Atlanta who had pushed for many of the changes as chairman of the brand's U.S. dealer council, said Horn's remarks were a sign that VW's top executives in Germany, are committed to working with U.S. dealers.

"Why we're now seeing this renaissance of listening and change from VW management, I don't know," Ellis said. "What I do know is this: I am very excited about the future."

Volkswagen said an unpopular stair-step bonus program for meeting new-car sales targets will be phased out later this year, though customer satisfaction scores will still be used to calculate bonuses.

Service loaner changes

Volkswagen also announced a plan to tweak its new service loaner program, also put in place in 2013. Some dealers had complained that it required them to maintain too many loaners, at too great a cost. The company said it will retroactively pay dealers $500 for every car that they pressed into loaner service, among other changes.

"We want to give more freedom, more leeway to the dealers," Horn said in an interview with Automotive News. "We looked at the competition -- let's face it. We looked at the American landscape, on what the bonus programs look like, what the margin structures look like. And you know, salespeople are changing brands. We need to be much simpler."

VW also promised more money for advertising. Dealers were shown three new Tier 2 TV spots that will focus on the attributes of VW products, such as the fuel economy of diesel engines.

"For me it's quite obvious: We have product advantages," Horn said. "If the customers don't know this, we have to make it more clear."

You can reach Gabe Nelson at gnelson@crain.com

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