By on April 3, 2016

Herbert Diess, Image: Image: RudolfSimon (CC BY-SA 3.0) via Wikimedia Commons

Volkswagen dealers in the U.S. will get more vehicles to sell this year and next, but there’s still no word on possible reparations or when to expect a diesel emissions fix.

At a meeting with dealers at the National Auto Dealers Association convention on Saturday, Volkswagen brand chief Herbert Diess promised to “redefine” the brand and boost shipments of popular models, Automotive News has reported.

The meeting aimed to calm the fears of increasingly frustrated dealers while providing some certainty about product strategy. Despite promising to carry on with the strategy favored by departed Volkswagen of America CEO Michael Horn, Diess’ reassurances didn’t win over everyone.

Steve Kalafer, owner of a 17-franchise New Jersey dealership group, said the promises were “broad statements” and “nothing more than more of the same.”

Volkswagen sales, which have fallen since 2012, slipped a further 12.5 percent in the first quarter of 2016, placing most dealers in an unsustainable position. Dealers and their advocates generally agree that annual U.S. sales of 500,000 are needed to stabilize the brand and its network.

To grow sales, Volkswagen will ship 20,000 extra Tiguan crossovers to U.S. dealers and the same number of Beetle Classics, while volume of other models will rise in smaller amounts. The automaker plans to deliver 75,000 Golf Alltrack models in 2017, bolstering the 15,000 it will ship for the model’s late 2016 launch.

Muzzled by the law, Diess couldn’t discuss when dealers will be able to start fixing hundreds of thousands of diesel models caught up in the emissions scandal, including sidelined inventory that once made up a significant portion of dealer sales.

Franchise owners hoping for some acknowledgment of the need for compensation for sunk costs and diminished revenue will have to keep waiting. Diess didn’t comment on potential settlements.

A five-person committee of dealer owners was formed on Friday with the aim of extracting a reparations package out of Volkswagen, but work on that front has only just begun.

There’s no word yet on whether a lawsuit drafted on behalf of a group of dealer owners seeking compensation will be filed. The party behind the potential suit was waiting to hear what Volkswagen executives had to say at the NADA conference.

[Image: RudolfSimon (Own work) [CC BY-SA 3.0], via Wikimedia Commons]

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34 Comments on “Diess Extends a Flimsy Olive Branch to Volkswagen Dealers...”


  • avatar
    Jimal

    While Dieselgate is the squeaky wheel du jour, the reality is that the vehicles dealers needed years ago are still years away at this point. Other good product would have blunted the damage from the Diesel fraud.

  • avatar
    Vulpine

    You know, we wouldn’t be seeing these kinds of dealer/OEM issues if there were no franchised dealerships. Those dealerships make their money fixing cars, not nearly so much selling them. All they’re doing now is adding straws to the camel’s back and it might not take too many more straws to see Volkwagen Group’s back break, potentially costing those dealerships ALL their Volkswagen dollars.

    • 0 avatar
      Erikstrawn

      Last time I checked my shareholder report, service had a 50% profit margin while sales had a 10% profit margin, which makes your statement sound correct, but the gross on the sales end is about a hundred times the service end, meaning that in the grand scheme of things, service is only a side business. Caveat – all my numbers are rounded to the nearest number that I can remember.

  • avatar
    mike978

    Sales are down, how is shipping more product the answer?

    • 0 avatar
      tedward

      I think the tiguan is actually doing much better now that they’ve adjusted leases etc… they had made that move before the tdi scandal and it seems like they don’t have enough of them based on comments here and elsewhere.

      Look at it this way total sales wise. They lost 20% of their inventory. The dealers probably do need more cars, especially since losing the tdi’s abruptly left trim level holes in their product range.

      It would be really cool to see what effect the tdi scandal has had on gas model sales. I don’t think we can get those numbers cleanly until vw has adjusted their inventory to reflect a gas model lineup.

      • 0 avatar
        derekson

        The overall sales on gas models are clearly up significantly if their sales volume is only down 12.5%, considering that normally 20% of their volume was diesel.

  • avatar
    gasser

    “promised…to boost shipments of popular models” Just which models are these?? New Golf Alltrack is not yet here and is unproven. The last Tiguan was not a barn burner and the new, larger model has an uphill battle against proven and entrenched brands. What VW really needs to ship is more reliable and longer warrantied models. A longer warranty might boost sales, but would definitely put more $$$ into dealers’ pockets.

    • 0 avatar
      April S

      This. Pull a Hyundai and do a 10 year/100K power train warranty. It really built consumer confidence after years of vehicles with garbage reliability. That they were no longer building cars that had a life expectancy of 50,000 miles.

      • 0 avatar
        TMA1

        VW has tried that. It probably caused a greater financial hit than Dieselgate. Doesn’t help that the 10-year warranty first applied to the MKIII.

        http://www.nytimes.com/1993/10/15/business/company-news-volkswagen-extends-10-year-warranty-to-1994-models.html

    • 0 avatar
      hreardon

      At the risk of sounding like an apologist, the “more reliable and longer warrantied” cries are getting pretty old. Volkswagen is solidly middle of the pack lately when it comes to reliability, and the new MQB Golfs, at least anecdotally, seem to be substantially better than their predecessors.

      The impressive jump in sales volume for the antiquated Tiguan shows that the issue there was the missing value equation when lease terms were horribly non-competitive. It sells nowhere near the volume of the big players, but now that it is competitively packaged and priced it’s selling (shock!).

      Passat, on the other hand, gets a double whammy of being in a shrinking segment (midsize sedans) and lacking any distinguishing features to help it stand apart.

      New Golf is a fantastic car – with the wrong body style. GTI sales are holding pretty solid, but VW hasn’t really been able to move the needle much beyond the 1800-2000 units/month benchmark they seem to have set.

      If VW had their entire NA portfolio on MQB already, combined with the new Tiguan and 3 row SUV they’d be in a *much* better position on all fronts (efficiencies of scale, more modern design/technology, speed to market, etc.), but as-is, the next 24 months are going be extremely rough for VW dealers specifically, and Volkswagen AG in general.

      • 0 avatar
        Richard Chen

        Paraphrasing Rumsfeld: “You go to the US market with the VW lineup that you have not the MQB lineup you might want or wish to have 5 years from now.” So what’s the ETA on the MQB sedans? 1-2 years away, just in time to coincide with their competitors’ refreshed lineups.

        The dealers are VWoA’s primary customers, and I don’t envy them with their TDI inventories. Sales were already down 16% from 2012’s peak coming into 2016, and those sweet lease/financing deals aren’t moving enough non-Tiguan metal. I’ve heard from someone who runs a dealership in a multi-franchise group that their VW store has always been a money pit even in good times, how much longer until they throw in the towel?

        • 0 avatar
          hreardon

          Richard,

          One of the big advantages of the MQB ‘kit’ is that it allows the manufacturer to respond much more quickly to market changes than in the past. IN THEORY this will allow VW to rollout incremental product improvements more regularly than in the past. Example being the infotainment update that, for once, the US received on par with the rest of the world.

      • 0 avatar
        NickS

        @hreardon

        Not to disagree, but if those newer platforms where more reliable Volkswagen would lose nothing by offering longer warranties on them. It would be an indication of how reliable they think their cars are.

      • 0 avatar
        sdunn35

        Two months ago, really wanted to buy a VW. Tiguan – ‘antiquated’ is spot on. But what we were really hoping to like was the golf sportwagen, which was beautifully turned out, but just a bit too cramped for us, and i suspect much of the population who is out there buying CRVs, Forresters, RAV4s and the like. The same cart, upsized maybe 5%, (Passat sportwagen, anyone?) would seem pretty competitive.

        • 0 avatar
          hreardon

          sdunn35-

          Yeah, the upcoming Golf Alltrack seems to me more of an Impreza challenger, than an Outback. A Passat Alltrack would be a more direct comparison, for sure.

          Subaru has proven that wagons and hatches aren’t completely dead in the US, especially in markets that still devour them: New England, Pac Northwest, Great Lakes region.

        • 0 avatar
          brettc

          In the mind of a VW executive:
          Americans don’t need a Passat wagon even though it could easily be federalized. Instead, they will either buy an outdated Tiguan or wait for our 3 row Crossover that will go on sale in 2017. They would never go to another brand.

          I think abandoning the Passat wagon was a stupid move, but I guess VW knows best…

          • 0 avatar
            tedward

            You’ve got to feel for them on the wagon front. I may be perhaps the most irrational wagon enthusiast around and even I’ll admit that there is no way to justify bringing the euro passat here.

            First, they already offer one of only two wagons available at mainstream price points. Second, they’ve already amply demonstrated that Americans won’t buy euro priced passats. Third, we’re talking a very expensive federalization as the current sedan from Europe is not in our market in any form.

            I mean, I’d own one already if it was here with a stick, but I have to give them a pass when it comes to the reasons why not.

          • 0 avatar
            Vulpine

            Are you sure it was VW that said that and not the dealerships? We’ve lost a lot of our favorite cars because the dealerships thought they knew better than their customers what they really wanted.

  • avatar
    SCE to AUX

    I don’t understand how an extension of the Golf line is expected to outsell the entire line today.

    Golf sales:
    2013 = 30k
    2014 = 36k
    2015 = 65k
    2016 = 48k??, TBD

    Golf GTI sales:
    2013 = 13k
    2014 = 17k
    2015 = 23k
    2016 = 20k?? TBD

    So how will 75k Golf Alltracks ever be sold in the US? Is there really that much demand for a Golfwagen?

    • 0 avatar
      Richard Chen

      A: Magic

      Subaru sold twice as many Outbacks last year, but it took them until 2010 to pass 75K and the product had already been around for 15 years.

  • avatar
    Storz

    He didn’t mention a fix for the diesels, because there isn’t one. If they could be fixed economically we would have heard about it long ago.

    • 0 avatar
      SCE to AUX

      Yes, I’ve become convinced they’re working solely on a legal-financial solution at this point.

      The specter of an endless recall, followed by poor reviews in the press of the resulting fix, drawn out over years, is just too much to bear.

      It’ll be much easier to just crush cars and write checks.

  • avatar

    Scirocco, please. Even one from 2008.
    Stop ignoring us, VW.

    • 0 avatar
      derekson

      I really don’t get the desire for the Scirocco. It’s a slightly more aggressive looking GTI, with less practicality and the same performance/handling.

      It’s also likely to be a casualty of Dieselgate. It’s such a niche model that they’ll probably skip doing a new generation.

  • avatar

    Well, that’ll fix it. More vehicles when they can’t sell anything thanks to the scandal that makes them all look like liars. Right on. Awesome solution.

  • avatar
    GTL

    VW needs to make more Golfs and Sportwagens available; inventory on non-GTI Golfs are practically non-existent as is inventory on all but the lowest configuration of the Sportwagen.

    Dealer inventory runs in single digits for Golf and Sportwagens, and zero digits for SE or SEL versions or either one. There’s just not enough to replace the lost inventory of TDIs.

    • 0 avatar
      Vulpine

      You might want to keep in mind that the dealers did it to themselves by ordering too many of what, now, they can’t sell. The consumer isn’t who made certain models popular, the dealerships did by overstocking on what they wanted to sell, telling the consumer, “Take it or leave it.”

      Far too few buyers are willing to special order and wait for it to arrive, which means the dealerships get to make the call on what’s “popular” and what’s not. That’s why we don’t have any real color on our cars any more, that’s why we have such boring choices for interior colors and that’s why we have almost no choice in options any more. People are too willing to let others run their lives.

    • 0 avatar
      lon888

      Where do you live? Here is OKC, the VW dealers (there’s 3 of them) usually only have 2 GTI’s on the lot at any given time. They’re always either white or black, 2-door and mid or low-level trim and always automatics. Great selection!

  • avatar
    seth1065

    Well if there is a buyback or enhanced trade in for TDI’s and VW wants to keep those customers they have to have something to get them into. Some would take the sports wagon which seems in short supply.

  • avatar

    Selling VW’s my whole automotive life and now GM of one of the larger VW stores in the nation, the new Upper Management of VW AG has now a much better understanding of the US Market and so far are much more engaged to make sure they do understand, hence the extra visits here to the US. Once the TDI issue is settled and we do have some ways to go with that, the new product will give us a much better chance of success here in the US. Our cars from the least expensive now turbo charged Jetta to the top of line Passats, do offer a more upscale driving experiance (european) that most of our competitors, add in all the extra incentives we have been given at this point, if you have the correct sales staff you can sell new VW’s. Now is the time to re-think expenses, make sure your sales staff can make money, and in general ride out the next number of months, we will get better.

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