Diess says VW will 'redefine' brand in U.S.

Volkswagen brand chief Herbert Diess vowed to “redefine” VW’s beleaguered brand identity in the U.S. market and pledged to boost production to support U.S. sales this year, but dealers say several issues remained unresolved after VW’s make meeting at the National Auto Dealers Association convention today.

The 90-minute meeting marked a cease-fire in VW’s strained relationship with its U.S. dealers. Dealers say they came away convinced VW would continue to pursue the objectives championed by former VW of America CEO Michael Horn, even without any clear signs of how VW planned to rebuild its reputation with customers and regulators in the wake of the emissions crisis.

Citing a government gag order, Diess and other executives offered no details about technical fixes for the diesel crisis or compensation for consumers, attendees said. Neither did they discuss the prospect of settlement talks with dealers, who on Friday formed a special committee to lead negotiations with VW on compensation for losses incurred by dealers since the scandal erupted in September.

Instead, VW’s executives stuck mostly to the product talking points, reaffirming longstanding plans to launch two key crossovers next year and pledging to boost production of some models to support sales in 2016, according to dealers who attended.

Some dealers looked at those comments as a reassuring sign, but others felt the executives missed an opportunity to show that they grasped the severity of the crisis facing some dealers and the brand itself.

“I would title the meeting ‘We’re working on it,’“ said Steve Kalafer, owner of the 17-franchise Flemington Car & Truck Country group of dealerships, which includes a VW store in Flemington, N.J. “There were no promises other than broad statements that we’re working on it and we’re doing our best. This is nothing more than more of the same.”

There were apologies, but they were “somewhat muted,” Kalafer said. “I think they’re tired of apologizing.”

More cars

Dealers will get an extra 20,000 units of both the Tiguan compact crossover and Beetle Classic this year than originally planned, according to Mathew Welch, general manager of Auburn VW near Seattle. VW will send 75,000 units of the Golf SportWagen Alltrack to the U.S. market next year after shipping 15,000 here for its fourth quarter launch, Welch said.

In the near term, VW pledged to send more production to U.S. dealers this year to help the brand reverse a 12.5 percent drop in sales through the first quarter.

The additional product will help dealers through what’s shaping up to be a tough 2016. Longer term, VW dealers need annual U.S. sales of around 500,000 in by 2017 or 2018 to be the brand’s new “baseline,”

Alan Brown, chairman of VW’s dealer council told reporters after the make meeting that VW failed to “turn a profit” in 2012 when its U.S. sales were at record levels (for recent years) of more than 430,000 units.

“That’s where [Volkswagen] AG is going to start to see wins; that’s where the dealer network will really start to see a return on sales,” Brown said.

(Note: VW’s actual U.S. record was set in 1970 with 569,183 vehicles, fueled by the iconic Beetle.)

Diess said volume targets weren’t discussed in the meeting but said in a statement to reporters, that VW wanted to “grow the volume consistently above past levels” in the U.S.

“We’re looking forward to really managing through the crisis and then really relaunching the brand and looking at a much more positive future,” Diess told reporters after the 90-minute meeting.

What he meant by relaunch is unclear. Michael DiFeo, dealer principal at Linden Volkswagen in Roselle, N.J., said any branding shifts should reinforce a message of “price-competitive German engineering.”

“It’s not going to be anything that’s not what we’ve been fighting for and what Michael Horn has been fighting for, since 2008 when Stefan Jacoby put us on a volume path,” DiFeo said.

Talks with factory

In the meantime, a handful of dealers tapped to negotiate a settlement with VW hope to begin talks as “soon as possible,” said Jason Kuhn, head of the team and chairman of the Kuhn Automotive Group in Tampa.

The so-called investment committee, an offshoot of the dealer council, was formed to seek compensation for losses incurred by dealers, and reduce the risk that breakaway dealers will sue the automaker.

“The dealer body is unified in the thought process that it is not in our best interests at this moment to take a litigation posture with our partners,” Kuhn told reporters. “I can’t promise that every dealer will be on board, but I can speak for the vast majority of the dealer body that they are aligned in this process.”