VW wants dealers ‘to become really profitable’

HERNDON, Va. — Scott Keogh’s installation as CEO of Volkswagen Group of America was the main reason his boss, Volkswagen CEO Herbert Diess, visited the automaker’s North American headquarters here last week, but Diess also was there to deliver a strong message to employees and dealers.

That message: Germany realizes VW’s operations in North America — including its lagging dealer profitability — need to get better fast, and Keogh has been granted broad authority and the resources to turn things around.

“I know many of them personally,” Diess told Automotive News, speaking of VW’s U.S. dealers. “I’m also sorry about, let’s say, the operational defects we had. We had to postpone a few deliveries. We had a few quality hiccups, which I’m really sorry about, and which we have to improve. We will improve the team in all areas. We will upgrade our operations. We can do better.”

Diess says he recognizes the need for VW dealers — whose average profit margins lag almost every other brand in the U.S., according to the National Automobile Dealers Association — to improve their profitability and that VW itself must help in that effort.

“We want the dealers to become really profitable,” Diess said, “because only a profitable dealer will deliver a good service, will have a good customer relationship, and we will work on that. We will do the utmost.”

VW believes its U.S. market share can one day return to the 5 percent level it peaked at in 1970, but Diess called that a 10-year project necessitating investment from Germany. Through October, VW brand sales in the U.S. have risen 5.4 percent, and its market share has moved to 2.1 percent, up from 2 percent at the same time a year ago.

“I think we have the right dealer body for still a lot of growth to come. We will come with exciting new models. There will be growth potential, and I’m optimistic that we can improve dealer profitability,” which is a major performance indicator, Diess said.

“What we foresee for the Volkswagen brand is a story very much like the Audi story,” he said. “We aren’t coming from nowhere; we have a base, and everyone knows us. But there’s a long way to go to really make Volkswagen a volume player here in the United States, and I think Scott has shown that it can be done.”

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