FRANKFURT -- Wolfgang Bernhard, the head of Volkswagen's VW Brand Group, warned staff that quality problems must be corrected quickly as it faced a "very difficult" three years due to intensifying Asian competition and a deteriorating market.
Bernhard said tackling nagging quality problems that had bedeviled the VW marque was his top priority.
"We are standing at the crossroads," he said in a newsletter to staff, a copy of which Reuters acquired.
"We must act quickly! The next three years will be very difficult."
Bernhard unveiled initial details of his turnaround plans to employees of the brand group, which includes VW, Skoda, Bentley and Bugatti, that the former Chrysler manager has overseen since May.
"There are no statistics on quality where we are ranked among the top, and in some we're even far behind. This cannot continue!" he said in the newsletter.
U.S. drivers placed VW 34th out of 37 brands in terms of dependability, while German drivers ranked it 20th out of 27 in terms of consumer satisfaction, according to recent surveys by research firm J.D. Power.
Bernhard aims to drastically reduce the 48 weeks it now takes between recognizing a production problem in cars that have been delivered to customers and making the necessary production changes. He also said that management bonuses will be tied to product quality for the first time.
"Furthermore, we have established a Product Quality Forum that will meet every four weeks to get this problem under control," he said.
The 44-year-old manager said that VW must create more effective production processes in order to reduce manufacturing costs that are 40 percent higher than the competition.
Bernhard reiterated that VW has to save 1 billion euros ($1.19 billion) in material costs by the end of next year.
He said the company needed to build attractive cars that are affordable to avoid pricing itself out of the market.
Analysts blasted Volkswagen last year for overpricing its new Golf hatchback, which effectively forced VW to offer free air-conditioning to help boost demand for its most important model.