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New chief aims to boost VW's fortunes in U.S.

Image: Jonathan Browning
Jonathan Browning, seen here in a 2009 file photo, is a veteran industry executive who has been tasked with boosting Volkswagen sales and reducing its losses in the U.S. market.Prakash Singh / AFP - Getty Images file

It’s a long way from Wolfsburg, Germany, to Washington, D.C. Just ask Jonathan Browning, who signed on as Volkswagen’s global sales chief in June but suddenly finds himself in charge of the giant automaker’s efforts to rebuild its American market.

Browning, 51, will be the new CEO of the suburban D.C.-based Volkswagen Group of America.  He succeeds Stefan Jacoby, who unexpectedly resigned this summer to take over as the new head of Volvo after Ford sold it to China's Zhejiang Geely Holding Co.

Browning has a tough challenge ahead of him although he should get a boost from the $4 billion Volkswagen is pouring into the U.S. market. Volkswagen has been losing money, along with market share, for years in the U.S. market. While the flagship VW brand has seen a 21 percent sales gain for the first eight months of 2010, it suffered an 8 percent decline in August.

And it has been embarrassed by a series of poor reviews in key consumer studies, including the 2010 J.D. Power and Associates Initial Quality Survey, where it lagged well below industry average again.

On Monday, the new VW Group boss admitted he had some catching up to do.  Asked for the timing of a turnaround at a National Press Club event, he hesitated and quoted his predecessor, who had laid out an aggressive plan to boost Volkswagen sales to 800,000 units by 2018 (from about 300,000 currently), and to stanch losses even sooner.

“We expect to be in profit in the market by 2013,” the British-born Browning said, cautiously adding, “I’m sure those statements were based on some sound analysis.”

They also may be based on more than a bit of wishful thinking. In a curious use of a double-negative, Browning suggested that, “Not many people of my generation don’t have fond memories of the VW Beetle and the VW Microbus.”

Four decades ago, long before the Japanese gained a grip on baby boomers’ hearts, minds and pocketbooks, the Beetle and Microbus were the nation's dominant imports. The two now-iconic vehicles helped push VW’s U.S. sales in 1970 to a peak of nearly 600,000 vehicles.

So far this year, U.S. sales have come to just 240,000, including Volkswagen and Audi models.

“We know we have a lot of work to do,” Browning told reporters at the press club. “We have set ourselves some big goals, but I am confident we can do this.”

Quality snags have certainly hurt, according to analyst Joe Phillippi of AutoTrends consulting. But he and other observers contend VW also has been harmed by its seeming indifference to the American market.

While there’s been a small, loyal core of U.S. buyers who have appreciated the distinctly European character of products like the Volkswagen Golf and Jetta, those models haven’t been able to connect with the American mainstream like competing Asian models, such as the Toyota Corolla or Honda Accord.

That’s going to change, insists VW board member Christian Klingler, who oversees American operations. For a years, the German maker seemed convinced it could marginalize the U.S., focusing instead on other markets. Indeed global volume this year is expected to top 6 million, putting it within striking distance of the world's leader, Toyota, which has been having troubles of its own lately.

But even though China is now a larger market for the company than the U.S., Klingler says it would be a mistake to continue ignoring the demands of American buyers.

“Our (global) focus is sustainable growth,” he said. “We know the United States has to be one of the most important milestones for achieving that growth.”

To underscore that shift in strategy, Volkswagen is putting the final touches on a new, $1 billion assembly plant in Chattanooga, Tenn., its first American factory since closing a plant in Westmoreland, Pa., a quarter-century ago.

The new plant will produce a replacement for Passat specifically developed with the U.S. in mind, said Klingler. Currently codenamed NMS, for new midsize sedan, it will debut in the 2012 model year.

But there are already some examples of VW’s new direction for the U.S., notably including the 2011 remake of the compact Jetta. Significantly, VW added a version dubbed the Jetta S, which carries a base price of $15,995, nearly $2,000 less than the starting price for the 2010 sedan. That puts the car within competitive reach of the best-selling entries in the U.S. compact sedan market, the $15,655 Honda Civic and $15,450 Toyota Corolla.

The latest sales numbers suggest that the cut-price strategy may be working: Jetta showed a sharp increase in August sales. But the new model has also taken some hits from critics who contend it may have become a bit too Americanized, with an excess of plastic in the cabin and some decidedly non-German technical features such as rear drum, rather than disk, brakes.

There’s also the next-generation Beetle, which is being recast in a way VW hopes will help tap an emotional wellspring, both among America’s aging boomers and younger buyers looking for something hip and affordable.

Wolfburg’s decision to shift Browning to the United States is more than a move meant to fill an empty spot on the organizational chart. He’s lived in the United States twice during his career, once while getting a master's degree at Duke University. And he has spent much of his 29 years in the auto business working for General Motors and Ford.

That should give him a leg up on many of the insular German executives based in the provincial company town near the old East German border.