DETROIT - When Clive Warrilow arrived at Volkswagen of America Inc. in January 1994 as its new CEO, 'There was a lot of despair here,' he recalled. 'People were very broken in spirit.'
VW had just suffered its worst year, selling fewer than 50,000 cars in 1993, and was bleeding red ink. By comparison, VW sold more than 500,000 cars in the United States in 1970, its peak year. The brand's advertising and positioning also were weakened; the carmaker struggled with a tarnished identity as post-Beetle models failed to excite U.S. consumers.
Executives at German parent Volkswagen AG, also on its knees with huge losses, considered pulling out of the market. But a decision was made to stay, and Warrilow parachuted onto the scene from the same post in Canada. He admits to having had his fingers crossed.
VW's German bosses 'told me to turn around the brand and stop the bleeding,' he said. 'Then they shook my hand. They let me do it my way.'
In partnership with marketing honcho Steve Wilhite - who carried the odd-for-the-U.S. title of core process leader - and Liz Vanzura, director of marketing and advertising, VW turned the corner in dramatic fashion. Earlier this month it announced sales of 201,729 cars in the United States through Novem-ber, a 60.4 percent jump from the same period a year ago. The hot New Beetle, which arrived early in 1998, accounted for 48,326 of that 75,960-unit sales jump.
For this turnaround, Volks-wagen of America has been named Marketer of the Year for 1998 by Advertising Age, a sister publication of Automotive News.
With Warrilow in the driver's seat, VW of America has returned from the dead. Perhaps most incredible is that the marketer's comeback started a few years ago without any new product - well before the New Beetle's launch.
Also, it has rebounded by selling only small cars, running counter to the U.S. truck trend. VW has overtaken competitor Mitsubishi Motor Sales of America Inc. in unit sales through November, and sold more cars in that 11-month period than Mazda North American Operations (although truck sales gave Mazda a higher total).
'We knew by 1996 we were going to be OK,' Warrilow said. 'When we got the Beetle, we really knew.' Looking back, 'the VW brand got kind of buried,' he added. 'But once we were able to dust it off, the inherent goodwill came back.'
THE BUG IS BACK
Response to the New Beetle has been overwhelmingly favorable since VW showed it as a concept car in 1994. The Bug gets lots of attention, and dealers enjoy the added traffic. Houston VW dealer Ben Hulsey reported earlier this year that consumers pressed their noses against the glass of his closed showroom to glimpse the New Beetle before it went on sale.
There seemed to be almost no consumers in the early 1990s, the bottom of a slide that started in 1975, when Toyota Motor Sales U.S.A. Inc. displaced VW as the top-selling U.S. import.
VW had stopped selling Beetles in the United States in 1979, and buyers quickly became disillusioned with VW's Rabbit model. In 1982, sales dropped below 200,000 for the first time since the early 1960s. In 1991, sales slipped below 100,000.
The brand's cars, designed in Germany, didn't meet North America's needs, Warrilow said. Also, the poor quality of the Rabbit hurt the brand's reputation. At one point, the quality of cars from VW's Mexican plant was so abysmal VW of America refused to accept vehicles. For 18 months starting in late 1992, VW had few cars to sell.
Upon his arrival, Warrilow began restructuring. He let go 47 percent of the corporate staff in the United States and Canada. The money he saved was poured into sales, marketing and customer service.
Quality at the Mexican plant improved. Once the new cars started arriving in 1994, Warrilow kicked off a leasing incentive deal to spur sales - $199 a month with no money down. VW sold 92,368 vehicles in the United States in 1994, more than doubling sales from the prior year.
In December of that year VW dismissed ad agency Berlin Cameron Doyle, New York, a now-defunct spinoff created 16 months earlier by former VW agency DDB Needham Worldwide. A predecessor, Doyle Dane Bernbach, had handled VW's U.S. ads since 1959 and had created the Beetle phenomenon in the 1960s.
In 1995, Boston's Arnold Com-munications was tapped as VW's new agency. VW wanted to return to its roots and focus on the German-engineered driving experience, said Wilhite, who will leave VW Dec. 31.
Arnold's brand campaign broke in July 1995. It announced: 'On the road of life there are passengers and there are drivers.' The tag: 'Drivers wanted.'
The theme 'isn't just about driving a car. It's about being a participant in life,' Wilhite said. The VW brand is 'the antithesis of cocooning. Our owners open the windows and they're smiling, and our customers tend to not be awfully concerned about what other people think.'
With no new product in 1996, the marketer initiated innovative promotions. That spring, VW started advertising a co-promotion with mountain bike maker Trek USA. The car marketer offered a limited-edition Jetta Trek sedan, complete with a 21-speed bike and roof rack. That winter, VW marketed the Golf K2, a similar package with snowboard and ski maker K2.
For 1997, Arnold developed memorable, amusing ads. The series of commercials included 'champion car breeder,' which spoofed a cattle rancher who herded VWs, and also the award-winning 'Sunday Afternoon' commercial, with two bored 20-something guys driving around in a Golf.
New product arrived in fall 1997 with the larger Passat sedan. VW recently announced Passat sales were 3,194 in November, a 115 percent jump from November 1997.
Next year, VW will launch redesigned models of the Golf and Jetta. Last month, it kicked off a series of teaser spots that do not show the cars. One shows a man at a backyard barbecue who shoves a chicken drumstick into a bowl of dip and operates it like a gearshift.
ROCKET TO RESPECTABILITY
VW's marketing tactics, combined with Arnold's creative spots, 'laid the groundwork for the brand rejuvenation, so when the new Passat and New Beetle came, there was fertile soil,' said Philippe Defechereux, a former VW ad executive.
The restyled Bug, the first VW ever sold first outside Germany, created a new kind of Beetlemania; it is virtually sold out for this year.
It has been 'the magnet to the brand,' Warrilow said, 'a huge boost that has rocketed VW back to respectability.'
Arnold's simple, clean New Beetle ads harken back to DDB's original 1960s work. Representative of those original ads, a DDB print ad featured small photos of the car surrounded by white space, with the headline 'Think small.'
The Arnold work shows the New Beetle with such headlines as 'Less flower. More power' and '0 to 60? Yes.' Arnold created five TV executions for the Bug, and although separately developed for Generation Xers and older consumers, all seem to have a universal appeal. Three are aimed at baby boomers, including one that states, 'If you sold your soul in the '80s, here's your chance to buy it back.'
VW's ad spending has risen with the brand's popularity. In 1993, the car marketer spent $42.7 million in measured media, according to Competitive Media Reporting. Spending rose to $70.5 million in 1994; was flat in 1995 at $70.1 million. It increased to $85.2 million in 1996 and rose again last year to $106.6 million. In the first half of 1998, VW spent $84.4 million on measured advertising.
CHANGING OF THE GUARD
As for the consumer: 'VW buyers tend to be more enthusiastic about their cars' than other buyers in the segment, said George Peterson, president of Auto Pacific Inc., a consultancy in Santa Ana, Calif.
In his company's 1998 customer satisfaction survey, VW's Jetta and Passat were tops in their respective classes, showing dramatic improvements from AutoPacific's first survey in 1995. Passat beat out American Honda Motor Co.'s hotter-selling Accord in the survey.
Warrilow expects VW's success to continue, but he cautioned against overconfidence.
'Arrogance is the beginning of the end, and this industry is full of arrogance,' said Warrilow, who leaves VW on Dec. 31, after 36 years. His successor is Gerd Klauss, currently a vice president and the top executive of VW's sister brand, Audi of America Inc. Klauss has tapped David Huyett as VW's new marketing executive.
Warrilow isn't sad over his departure. He said with a smile: 'I can leave here very happy. I built the basement, and they can build the roof.'