By on November 22, 2016

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Disgraced automaker Volkswagen AG is trying to smooth things over in the United States by promising to increase its commitment to North America. The company has stated that its core brand’s lineup will swell to include new electric vehicles slated for U.S. production in 2021.

The task of building those vehicles comes with a mountain of challenges.

“We will be significantly stepping up our activities in the USA,” Volkswagen brand chief Herbert Diess said on Tuesday. “Our goals are high and our strategy is very ambitious.”

Saying VW’s strategy is “very ambitious” is like saying the sun is “very hot.” The company just reached an agreement with its workers to cut 30,000 jobs worldwide to free up 3.7 billion euros in cash. The company also expects to reduce expenses by an additional 2.5 billion euros by eliminating conventional models that will eventually be replaced by EVs.

Saddled with a minimum of $16.5 billion in fines and repairs in the U.S. resulting from the emissions scandal, a devalued stock price, a reduction in sales, suppliers angry that VW has demanded they cut prices by $3 billion, and a net loss of $4.6 billion in 2015, the company has an uphill battle.

Bloomberg reports that Volkswagen’s namesake brand accounts for nearly half of the group’s sales. However, it was experiencing bloated production costs and management issues well before the diesel emissions crisis. Productivity at VW was 30 percent lower than its peers and the company was spending 60 percent more per vehicle than Toyota had over the same period.

The company’s new plan includes launching higher-margin SUVs, sedans, and electric cars in the hopes to win back customers in markets where it severely lagged competitors. Diess said that success will be imperative to reviving the core brand, as it accounted for 59 percent of the German group’s auto sales in 2015 (but only a scant 16 percent of the group’s operating profit).

“We not only want to be profitable in Europe and China but are determined to generate positive results in all major markets by 2020,” he told reporters.

“For years we have been lacking a blueprint for success in the U.S., while we are losing ground to rivals in markets like Brazil or India. In part we have also missed market trends, above all the SUV boom,” said Diess

Volkswagen now says it plans to increase its SUV and crossover lineup to nineteen vehicles by 2020. The company currently has two: the Tiguan and Touareg, with the upcoming Atlas arriving next year.

As of now, VW’s sole factory in the United States resides in in Chattanooga, Tennessee. If Volkswagen plans to produce a bevy of new electric cars in North America, that factory — which builds the Passat and, beginning next year, the Atlas — is the obvious candidate. Does Volkswagen have the capital required to pay its dues and create the production capacity needed to build the promised three million units?

“Over the next few years, Volkswagen will change radically. Very few things will stay as they are,” Diess said. “The electric car will become the strategic core of the VW brand.”

It will have to change drastically if it wants to pull any of this off.

[Image: Volkswagen]

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34 Comments on “Volkswagen Wants to Mend Fences With America, Promises Big U.S. Production Push...”

  • avatar

    VW has essentially no chance in the US market any time soon. Even WITHOUT the whole TDI mess, their product mix has been horrible even BEFORE the current downturn in the car market. I’d put them in the same position today as Hyundai after their initial issues with product quality.

    The fact that as of today, they have precisely two CUV’s on the market, one of which is horribly out-of-date (still rockin’ an ’09 platform) and uncompetitive, and the other of which is horribly expensive and excessively upmarket for the brand, is inexcusable. I thought it was hilarious when they proudly announced the manufacturing site for the new Atlas, ignoring the fact that it should have been –>for sale<– YEARS ago. (Yes, I know a new Tiguan is coming out soon, but it ain't here yet.)

    You'd think a company of it's size would have had product to compete in this space years ago, (both in the US and elsewhere; we are hardly the only market that can't get enough of the things), but they don't. Instead, they seem to keep running things with the view that the whole world has identical taste to Germans. I imagine their US dealer body could have told them about a decade ago that their product plans were all wrong for the US market.

    The TDI fiasco was just icing on the proverbial cake. To recover, they need to do MORE than just fix the product lineup. I’d say something dramatic, like counter perceptions of VW quality with a Korean-style 100k powertrain warranty would be a good start. (Or, if they wanted to be particularly bold, make it 100k Bumper-to-Bumper.)

    • 0 avatar

      “I thought it was hilarious when they proudly announced the manufacturing site for the new Atlas, ignoring the fact that it should have been –>for sale<– YEARS ago. (Yes, I know a new Tiguan is coming out soon, but it ain't here yet.)"

      And this is part of their biggest problem. They are behind the rest of the industry and desperately trying to catch up. So in order to keep current owners from defecting to other brands that offer what they want RIGHT NOW they keep trickling out announcements about what is coming. What they don't tell you is that most times it seems like it takes at least 2 years from the time that one of these products is announced until you can actually buy one.

      Seriously, when was the new Tiguan announced? At least by early 2015, right? And where is it now? Yeah, the Atlas is coming first, but what segment of the crossover market is hottest right now? The small segment, the one that the Tiguan fills. Oh yeah…and IIRC, the new Tiguan is already available in Europe?

  • avatar

    Sell me a GTI for $10,000 and all is forgiven.

  • avatar

    VW produces unique and competitive products that have limited appeal in the US. If you drive a $14,000 Jetta and a $19,000 Civic the Jetta will have less NVH, a more potent engine and a tasteful minimalist design. The road manners and handling on the both these cars are very similar with the Jetta edging out in handling and composure. I’m currently in the dilemma of trading in my TDI for a different car. I might just go back to VW. I have not driven any other sedan at $20,000 that has the same appeal for me as a 1.4L Jetta. New for 2017 VW eliminated most of the trims on the Jetta. For $16,000 real transactions prices you can get vinyl, sunroof, cold weather package. Most importantly VW has manual transmission cars on the dealer lots.

    Yes I’ve had 3 major issues fixed by warranty on my TDI. But I’m tempted to gamble and to find a good German car. Versus, finding an expensive japanese car that I’m sure will not give me issues but has a boring ride.

    • 0 avatar

      And it comes in brown! And you can get your vinyl in tan or black-and-white instead of being stuck with just coal-black cloth! No question, the 1.4T Jetta is a sweet deal on a not-too-shabby car. It’s our market’s equivalent of a Skoda: like a VW, but built to a price, and roomier.

  • avatar

    Note to VW: this is a bad and silly plan. Instead, do what you are so good at, which is build Euro style sedans, and do that better than the competition. Leave the high volume uglobile business to GM/Hyundai/etc.

  • avatar

    Bring back the car for all people, simple mechanics with all the latest Tecky stuff, that’s it!
    EV cars are for the rich, we need more cars we can actually afford.
    I’m on my 12th VW and probably my last after I get rid of my 15 Golf TDI.

    • 0 avatar
      SCE to AUX

      “EV cars are for the rich”

      The average transaction price for cars is $34k. Most Nissan Leafs are less than that.

      • 0 avatar

        I know someone that just got a new Leaf. They also have at least two other cars. A car with a range of 80 miles that costs as much as a real car is either a luxury or a burden.

        • 0 avatar

          @todd: why isn’t and ev a real car? I’ve traveled over 40k miles in mine in two years, so wtf is it?

          • 0 avatar

            A real car is one that can fill all of my driving purposes, like the desire to visit friends 150 miles away for the weekend. I helped a friend move that distance last week, and I didn’t even have to stop for gas until almost a week after I got back. A Leaf would have been as relevant for such a task as a wheelbarrow, and even a Tesla would have been useless for going to a home with no charger in a city with two. I suppose we could have taken the Tesla to a charger, hoped it was empty, and then killed time while it charged instead of setting up a household, running errands, and then celebrating my friend’s bright future in her new home, job, and city. Nope. For how I live my life, I need a real car.

          • 0 avatar

            Maybe my definition of a real car should be one that can get me from Boston to California in less than 6 hours without stopping? Breakfast in Boston, then dinner with friends on the west coast rather than driving 3 days. Can you do that with your vehicle? Yeah, that’s it. It’s not a real car if it can’t drive to Europe. I go there. Those are my travel requirements, so it’s not a real car if it can’t do it.

            The thing is, I haven’t driven more than maybe 200 miles a day in years. You can get a Tesla with 300+ miles range and for me, even the 200-mile version would mean I’d never need public charging. Some homes do have charging capability. All you need is a 120v outlet. It takes a Leaf a while, but if you’re there overnight it’s not a problem.

            Yesterday, I went 143 miles. I had limited charging at my destinations but was able to top up at a 50kW charger at a shopping mall in 30 minutes while I did some needed shopping.

            An EV fits well with my particular life. Better than an ICE car. There are ICE cars in my garage, but they’re the toys that can’t be practically driven on a daily basis, not the EV. The EV is the real car that gets me around on a daily basis and can endure daily road abuse. To each his own.

  • avatar

    As Tiguan sales have demonstrated throughout the diesel fiasco: if you build product that the market wants, it will sell. What’s more shocking about the Tiguan’s success the past year is the age of the platform it is built upon (same goes for the Audi Q3).

    Priced and spec’d right, VW crossovers and SUVs will sell just fine and allow them to continue selling the nichier GTIs, Alltracks, etc.

  • avatar

    Mend fences? LIES

    Own a Q5 TDI. These SOBs have left me a holding pattern going on 14 months.

    Unforgivable! They don’t give a flying frak about customers. Only their bottom line.

  • avatar

    Bring over the Caddy for <20 K and I shall be your proselytizing acolyte making even Vulpy appear a slacker.

    This'n raht chere:

    Act now, Wolfsburg, while my license lasts!

  • avatar

    VW is correct in needing to change their image. But I’m not sure how going electric is going to make that happen. The typical VW owner is rightfully seen as a “blue state” voter. How does VW move into small town Ohio or even rural Oregon with an electric vehicle. Those are aimed at blue state millenials en masse. If VW wants to go electric, and do so in a mass market kind of way, they’ll need to build the infrastructure. Not just along the highways like Tesla, but in thousands of small towns nationwide. Otherwise, all they are hoping to do is turn the TDI buyer into an electric buyer.

  • avatar

    An immediate, cost-free solution for boosted VW respect / trust / sales would be for them to provide warranties to exactly match or exceed Hyundai / KIA. Why this hasn’t already been implemented is beyond my comprehension.

  • avatar

    If Volkswagen wants to step up production in America, it also faces another obstacle entirely: Explicit, illegal threats from elected officials that it will face economic reprisal if it expands.

    U.S. Senator Robert Corker (R, TN) and other officials whose geographic jurisdiction includes VW’s Chattanooga plant have openly announced that they will use their public office to renege on promised tax breaks that led to the original building of the plant in their state, and use their public office to block any further expansion of the plant in violation of their original promises, UNLESS the plant’s workers cave to their threats and forfeit their legal right to choose a collective bargaining agent for themselves.

    This is not shadowy innuendo but fact, widely documented by mainstream news sources. VW management is not noted for being a responsible citizen either toward shareholders or the public. Ironically, it now faces a challenge from the very people who are supposed to be the public’s guardians before it can exercise its legitimate right to use its own judgment about what would be most beneficial to all.

  • avatar

    If they want to mend fences with customers in the US, they should start with making good with their TDI owners. Instead they’re dragging their feet and violating the terms of the court settlement. Why do they think that US consumers would give them another chance?

  • avatar

    The Atlas is just really pathetic. A cross between last generation Tahoe and a 2010 Grand Cherokee. What a sad state of affairs.

  • avatar
    SCE to AUX

    By 2021, the entire EV market will have passed VW’s grand intentions.

    For starters, they should be offering a 200-mile e-Golf in 50 states by next spring, instead of the half-measures they’re doing instead.

    If the Atlas doesn’t stop their slide in the US, the VW brand will end up with maybe 1.2% market share by 2021.

  • avatar

    When Hyundai makes bold plans, they come to pass. When VW does likewise, it NEVER comes to pass.

    VW is too greedy, and too cheap to ever follow through for the NAM. Add to that, they are deceitful, and there you have it.

  • avatar

    As much as I like EVs, there is no way that they will save VW in this market.

    EVs aren’t going to really take off unless we see $5+/gallon gas. Low gas prices always kill EVs – it has been this way since they were invented.

  • avatar

    If we’re really going to see widespread EV adoption, other manufacturers need to get their heads out of their posteriors and buy into Tesla’s Supercharger network. The spread of DC fast charging is great but a 24 kW DCFC charger (50 kW at best) does not hold a candle to a Tesla 125 kW Supercharger.

  • avatar

    I hate how some like to change their image and not their culture, soul, or behavior. Although I like the engineers and workers, I don’t like the execs or company.

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