WOLFSBURG, Germany -- The U.S. may be ground zero for Volkswagen's diesel scandal, but company executives here proclaimed it the most important source of long-term growth for VW and said they are at work on a new brand strategy for the region.
Indeed, that is an optimistic outlook considering the hundreds of thousands of frustrated VW owners in the U.S. still waiting to learn what will happen with their cars -- not to mention the brand's decades of disappointing performance in the country.
"We believe that the USA has in fact the greatest potential for Volkswagen worldwide in the next decade," VW brand chief Herbert Diess told reporters here last week, though he added: "naturally not in the near future, since we are starting from zero in the U.S."
Volkswagen, which has long suffered from a sedan-heavy product portfolio, will get some relief over the next 18 months or so as it launches the midsize crossover scheduled to be built in Chattanooga, as well a long-wheelbase version of the Tiguan crossover imported from Mexico.
VW is not pinning its hopes just on a rejuvenated product range, however. Executives are still in the initial stages of drafting a new strategy to position the brand better in the U.S., where officials say customers have been confused by it swinging back and forth between near premium and mass market.
In recent years, "we didn't succeed in giving the brand a clear profile and consistent product portfolio that could allow us to expand step by step in the market," Diess said.
He said Volkswagen needs to target what he called the "aspirational middle class."
Determining how to position VW in the U.S. market could take time, a source said. The new direction will likely be decided after the parent group has set a global strategy to establish how to minimize cannibalization among its 12 brands. That strategy is expected to be decided by mid-June.
Diess praised the loyalty of the brand's U.S. dealers, many of whom he said are in the second- and third-generation of selling VWs. And he recounted how many Americans still have a positive association with the VW brand thanks to old-timers such as the original Beetle and Microbus from the 1950s and 1960s.
"All that leads me to believe that were we to work the market with the necessary consistency and focus, there is in fact clearly a big growth potential," the former BMW executive said.
The brand once aimed to sell 800,000 vehicles in the U.S. by 2018, a target set by VW CEO Martin Winterkorn after he took over in 2007. But Diess has said that target is no longer a priority. Bloomberg reported in March that VW dealers told Diess they needed to sell 500,000 to make a return on their investments, substantially more than last year's 350,000.
Despite its long-ago successes, Volkswagen has long struggled in the region. A decade ago the strong euro blew a hole in VW's NAFTA results and prompted the decision to build a plant in Tennessee to hedge its currency risks. After a brief period of success when the stripped-down U.S. Passat first arrived on the market, the brand quickly gave back its newly won market share gains.
Winterkorn was just about to institute changes to give local managers greater autonomy when the diesel scandal -- born out of an idea in 2005 to gain market share in the U.S. -- plunged the brand back into chaos and turmoil.
Winterkorn resigned, his designated North American chief quit days before starting the job and in March the brand lost its U.S. head, Michael Horn, who enjoyed strong support among VW's dealers. Last year its share dwindled to 2.0 percent from 2.2 percent in 2014. In 2012 the brand peaked at 3.0 percent, the best year since 1973.
Separately, Volkswagen officials said last Friday they felt progress was being made on reaching a deal with the Department of Justice to settle criminal and civil lawsuits lodged by U.S. authorities.
"We are working hard to reach a settlement on both, since we would love to quickly put this behind us," said Manfred Doess, head of group legal affairs at Volkswagen, speaking to reporters in Stuttgart.
"I consider it highly probable," he said when asked whether a deal could be completed by the end of the year. "But it would be highly speculative at this point to say whether it would be in the second, third or fourth quarter."
Volkswagen has set aside $8 billion to cover legal risks as part of an overall provision of $18.5 billion booked for all diesel-related costs that currently can be estimated.
