Dust still unsettled for VW

Volkswagen's U.S. dealers appreciate the cash relief they're getting from headquarters. What they need now are answers.

As VW executives address hundreds of U.S. retailers at the brand's national dealer meeting this week in Orlando, they'll be under intense pressure to fill an information void that has left dealers with critical questions about VW's near-term response to the crisis and the brand's long-term prospects. Among them:

• When will VW be able to resume sales of new diesel-powered cars? 
• How will it fix the 482,000 noncompliant U.S. diesel vehicles? 
• How will affected owners be compensated? 
• How will VW's cost-cutting efforts affect its product plans for the U.S. market? 
• And how will the U.S. market's needs be served under a reorganized corporate structure aimed at diffusing more power to regions and brands? 

That last issue only got cloudier last week after Winfried Vahland, the former Skoda chief tapped to head VW's newly formed North America region, abruptly quit the automaker before he could assume his new post.

Just two weeks earlier, Vahland's appointment appeared to bring some clarity to the role of the North America operation as a linchpin of VW's recovery strategy. A 25-year VW veteran with a record of successful brand-building, Vahland, 58, seemed like a natural fit for the North America role, which he helped conceive along with former VW CEO Martin Winterkorn before the crisis hit, a source told Automotive News Europe last week. He had led VW's Skoda brand to significant growth after taking over as CEO in 2010. Before that, he revived VW's ailing operations in China.

His decision to abandon the North America assignment -- over disagreements about the structure of the new unit, according to the company -- caught VW off guard and sent the company scrambling to find a replacement to lead a region where Volkswagen desperately needs a turnaround.

Finding a replacement could take weeks, and there's no obvious candidate within VW. Indeed, said a source who attended a meeting of around 400 top global VW managers in Leipzig, Germany, last week, it's quite possible there will be no replacement at all and that Michael Horn, Volkswagen Group of America CEO, will be spared from having a new regional boss above him.

"I think the decision to name someone on the management board as head of North America was in part to send a signal of its elevated importance," said the source, who stressed that no decision has been made.

Horn, for his part, emerged with little damage from an appearance earlier this month on Capitol Hill, where he was grilled by lawmakers on a U.S. House oversight panel. His candor and pledges to make things right by customers won him plaudits and firmly established him as the face of VW in the U.S.

Still, Arndt Ellinghorst, head of global automotive research at Evercore ISI, says VW may need outside blood to achieve the success that has eluded the brand for decades in the U.S., where its market share sits at a paltry 2 percent.

"Volkswagen would be well-advised to get someone else in there from another brand with experience in the U.S. to run the brand ... not just another German trying to tell U.S. consumers what they need," Ellinghorst said. "Not getting one of the most profitable regions in the world right is just really appalling."

At the Leipzig meeting last week, Volkswagen AG CEO Matthias Mueller stressed that the automaker's move to empower its regions and brands with less meddling from VW headquarters in Wolfsburg is on track.

"The basic principle can be boiled down to the following: The group will be more decentralized with more independent brands and regions," Mueller said. "That means more freedom to take decisions and more entrepreneurial responsibility. I definitely do not intend to intervene in the details of product decisions."

That should be welcome news for VW of America and its dealers, who waited impatiently for Wolfsburg to greenlight a product blitz that will bring a new midsize crossover and a bigger Tiguan compact crossover to the U.S. market, plus a subcompact crossover as early as 2018.

Those plans should also be safe from the 1 billion euros in annual investment spending cuts planned through 2019 that VW global brand chief Herbert Diess announced last week.

"Imagine we were to pull the plug on the midsize SUV, even though it's basically finished. That would make no sense," said the source who attended the Leipzig meeting. "It costs more to kill it than to build it, and we need the car in the U.S."

Trimming 1 billion euros per year is "almost irrelevant" to VW's ability to maintain key strategic plans such as its crossover blitz in the U.S., Ellinghorst said.

"VW is just a company that is overspending and underinnovating, and there's no other carmaker that can cut more fat than VW." 

Christiaan Hetzner contributed to this report.