VW Offers US Dealers a Long-Term Commitment with ‘Relaunched’ Brand

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Volkswagen met with hundreds of its US dealers over the weekend to quiet their long-term fears without really filling them in on how the company is going to deal with the very immediate demands of Dieselgate, including compensating the retailers themselves for repairs they’re going to have to make.

At a widely anticipated meeting between VW brass and restive dealers, in Las Vegas where they were all convening for the convention of the National Auto Dealers Association, Herbert Diess, head of the passenger car brand, offered dealers a bunch of welcome reassurances. But he was constrained for a number of reasons from talking about the other main area of concern: when and how the company would repair the affected “clean diesel” vehicles and make both dealers and customers whole because of their loss in value.

Over the long-term, Diess said, VW would “redefine” the company’s tarnished image, according to multiple reports, and “relaunch” the Volkswagen brand. He recommitted Volkswagen AG to a long-term, expanding presence in the US market that would be based on volume pricing of its German-engineered automobiles as well as a product lineup that will see growth after a couple of years of relative stasis.

Diess said American dealers and the VW arm in the US would get more input than ever into what the parent is doing as Volkswagen recalibrates its plans for the US market and tries to get back on a fast growth track like the one it was enjoying from 2011 through 2013.

“We didn’t talk about the volume but we did talk about growth, consistent growth,” Diess said of his meeting. “And we will bring the product momentum in the next two years” with the new Alltrack wagon this year, and two new SUVs next year, one of which will be built at the VW plant in Tennessee, as well as other rumored vehicles.

In the wake of Dieselgate and a plunge in US sales, the brand has dropped ambitions of reaching 800,000 US sales by 2018—which would have represented a doubling of last year’s 349,000 sales. Diess’ goal was to allay dealers’ fears that Volkswagen would commit a wholesale cutback in its US ambitions.

Dieselgate will impose many billions of dollars of lost sales, brand equity, repair costs and government penalties on the company, and meanwhile American dealers are sitting on a collective $1 billion or so in recent investments in the brand’s growth, including new physical formats at dealerships, bulking up inventory—even a new program called Volkswagen Service Xxpress under which US customers can stop in on demand even for substantial vehicle service.

For now, the dealers are committed to working with Volkswagen on all these challenges rather than suing their supplier. But presumably these independent retailers—nearly all of whom sell other auto brands as well—are going to have to see substantial progress soon on putting Dieselgate in the rear-view mirror.

And then there is the future. “I just don’t know how they’re going to get to 500,000” sales a year in the US, said Michelle Krebs, analyst for Autotrader.com. “They’re in a big hole, and now the [overall US] market is plateauing.”

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