Michael Horn undoubtedly knows Volkswagen Group better than America.
He’s spent 24 years at the company and was, among other things, responsible for sales and marketing in Europe, but with sales plummeting in the United States, he was named president and chief executive officer of the Volkswagen Group of America, Inc. He’s now responsible for turning around a brand that has lost its momentum since back-to-back years of solid American growth in 2011. The automaker’s dream of selling 800,000 vehicles in the U.S. by 2018 has morphed into a nightmare.
The situation in the United States has become critical in the past 15 months and shows no signs of abating. In July, for example, Volkswagen sold just over 10,000 Jetta sedans, its most popular model in America, which was a drop of 22.1 percent over the previous month, while sales of the Passat sedan dropped 33.6 percent to just 7,222 cars in the same time period.
The one bright spot was the GTI hatchback, which saw sales rise 65% to almost 2,000 cars. Yet even at the height of their sales, the Jetta and Passat never came close to dominating their sectors, while the Wolfsburg-based automaker has nothing to offer in the booming SUV category. Adding to the woes are problems with quality control, resulting in an embarrassing series of recalls, most recently of 150,000 Tiguans manufactured from 2009 through 2014. This followed a recall of 18,500 Routan minivans.
This is the situation Mr. Horn inherits from his predecessor, Jonathan Browning, who cited “personal reasons” for his resignation. He finds himself looking for clues to what American car buyers seek when they look for a new vehicle, a search Volkswagen has been on for decades.
Adding to the woes at Volkswagen are problems with quality control, resulting in an embarrassing series of recalls.
There are still painful memories in Wolfsburg over the decision to open a manufacturing plant in southwestern Pennsylvania in 1978 to produce Golfs and Jettas. The plant closed in 1988 after five years of bleeding money in the small car segment, when American consumers turned their backs on the German offerings. Volkswagen simply didn’t offer the kinds of conveniences in its cars – such as beverage holders — that American buyers took for granted in competing brands. Even today, Volkswagen dealers in the United States lament the lack of things such as USB ports and a rearview camera, which are now common in most other cars and in the company’s higher-end brands.
“Why can Audi and Porsche offer such great things while we lag so far behind?” said Alan Brown, a Volkswagen dealer in Dallas.
Volkswagen spent $1 billion to build a state-of-the-art manufacturing plant in Chattanooga, Tennessee, that opened in 2011. The plant is capable of producing up to 150,000 Passats per year, but has never operated at full capacity. Volkswagen is learning from its past mistakes and has created a U.S.-based team led by Mark Trahan, executive vice president for group quality at Volkswagen of America, to study and evaluate the myriad of consumer complaints about the company’s products. The quality control study was closely followed in Wolfsburg and Mr. Trahan reported to the executive suites personally 14 times in 2011 alone.
Now Mr. Horn and Volkswagen Chairman Martin Winterkorn are taking the rescue efforts a step further . The company will open a new research and development center near the Tennessee plant, where 200 engineers will dismantle rival vehicles to analyze vendor parts and try to discern the secrets of more successful brands such as Ford Motor Company and Toyota Motor Corporation. Mr. Horn also wants to develop new types of vehicles for the U.S. market. Volkswagen is already investing $900 million to expand the plant in Chattanooga for a new, medium-sized SUV, which would compete with market leaders such as the Ford Explorer and the Toyota Highlander.
Meanwhile, there are other initiatives in the works, including improvements to Volkswagen’s network of American dealers, who are critical to improving sales. There are plans to create a group called the “North America Committee,” which would consist of 45 high-ranking dealership managers from the United States and Germany. “We work systematically,” Mr. Horn said.
Whether Volkswagen can reverse its fortunes in the lucrative American market remains unknown, but the company is clearly and deliberately changing its ways.
Thomas Jahn is bureau chief in New York. He can be reached at firstname.lastname@example.org