U.S. dealers oppose possible ouster of VW executive

WASHINGTON -- Volkswagen’s national dealer council and other dealers are publicly opposing the VW supervisory board’s reported plans to dismiss Volkswagen of America CEO Michael Horn.

“Recent reports that his position may be in jeopardy over this situation made it imperative that the dealer body express our unconditional support for Michael Horn,” Volkswagen’s 12-member National Dealer Advisory Council said in a statement to Automotive News delivered by the group’s chairman, Alan Brown, general manager of two large VW dealerships in suburban Dallas.

“Unless there is evidence being withheld from us showing some form of direct complicity or creation of this issue we must state that if he is removed as the CEO it would be nothing short of catastrophic to our market and our relationship.”

Horn, a 25-year VW veteran, has won the support of Brown and many other VW dealers since he assumed the top job for the Volkswagen brand and group in the U.S. in January 2014. Viewed as a savvy leader who can navigate the inner workings of VW’s Wolfsburg, Germany, headquarters, Horn helped secure additional autonomy for VW’s operation in the U.S. and overhauled past dealer policies that many dealers say were unrealistic and damaged profitability.

VW bloodletting

Reuters reported earlier today that the supervisory board intended to dismiss Horn and other senior VW group executives at the board’s Friday meeting the wake of its diesel emissions scandal that has gripped the automaker and prompted the resignation of CEO Martin Winterkorn.

“When we heard that, the first thing that we thought was ‘no way.’ Michael Horn is the leader who can get us through this right now,” said Matt Welch, general manager of Auburn Volkswagen, near Seattle. “What we don’t need is a new CEO coming in riding a white horse. What we need is stability at the top who can lead us through it.”

He killed the aggressive stair-step policies in place prior to his arrival that dealers broadly said set monthly dealership sales targets to unrealistic levels, sometimes double a given store’s historical monthly average. Horn in turn toned down the targets and created new policies that rewarded customer satisfaction in addition to volume, dealers say.

Horn also won dealer support by successfully lobbying for key product decisions for the U.S. market.

Horn helped convince VW to shorten the life cycle of its U.S.-market vehicles, starting with the redesigned Jetta in 2017, which will be redesigned every five years instead of every seven. He also lobbied aggressively to bring the Volkswagen Golf Sportwagen Alltrack to the U.S. in 2016 to be VW’s Subaru fighter.

“Michael Horn has tirelessly fought for the North American market to correct the many missteps of prior management that has led to the recent decline in market share," the council statement said.

"His ability to secure the right product for our future and the right product cycle have reinvigorated the dealer body in the knowledge that we will not be left behind as Volkswagen forged into the future globally. Not only did he repair the flaws in the business model of North America, he repaired in a short time what most felt was impossible: trust between the dealers and Volkswagen."

Ongoing issues

To be sure, things are far from perfect for VW’s U.S. dealerships.

Many dealers are still frustrated that the brand lacks a midsize and compact crossover that suits American buyers, though those are coming in 2017. VW dealers struggle to be profitable, and were angered by Horn’s plan to add up to 100 new dealerships to VW’s 650-franchise network by 2018.

VW’s U.S. sales dropped 2.8 percent through August this hear while the overall industry gained 3.8 percent. Two analysts today predicted VW will be the only major automaker with a U.S. sales decline in September. A third analyst predicted VW sales would rise. 

Shortly after the scandal broke, Horn on Monday rolled out a series of financial programs to aid dealers unable sell diesel vehicles that account for more than 20 percent of VW’s U.S. sales that are under a stop-sale order.

“The things that we’re worried about at the end of a quarter as we strive to hit certain objectives, they took that off our back as we handle what’s in front of us,” Welch said. “They were appropriate, immediate and necessary.”

In a memo sent to dealers Wednesday night, Horn appealed for dealers’ support in the crisis.

“Now, more than ever, our business relationship must be strong so we can together get back on track in the United States,” Horn said. “My entire team and I know that we will get past this time and with new product, strong operational processes, and an engaged dealer body our best days lie ahead of us.”

Horn was the first VW executive in the United States to publicly address the issue, apologizing for the scandal at a media introduction of the re-engineered Passat in New York City on Monday.

“Our company was dishonest with the EPA, and the California Air Resources Board and with all of you,” Bloomberg News quoted Horn as saying at the event. “And in my German words: We have totally screwed up.”

Mike Sullivan, a multi-franchise dealer with two Los Angeles-area VW dealerships, said Horn in all likelihood had no knowledge of the emissions software that was designed to fool regulators into thinking its diesel cars were cleaner than they were.

“Firing Mr. Horn would be 100 percent for show. After two years of running the distributorship, he would have zero to do with this,” Sullivan said. “If anything, Mr. Horn’s candor might be problematic.”