Volkswagen adjusts models, strategy

Volkswagen adjusts models, strategy

September 11th, 2011 by By Christine Tierney/The Detroit News in Business Around the Region

The VW logo is seen on the front of one of dozens of new Passats made at the Chattanooga Volkswagen assembly plant parked outside the plant. These cars will be used as demos for testing, internal quality control and press test drives.

The VW logo is seen on the front...

For many years, Volkswagen AG attracted a small core of loyal customers in North America and didn't seem to care much what anyone else thought of its cars.

VW dealer Dietrich Look summed up the automaker's pitch as, "'We bring it; you will like it.' That was the attitude."

But now, as Volkswagen seeks to expand in the United States, it's listening intently to American consumers and addressing not only problems but also annoyances.

VW already has made changes in the all-new VW Jetta compact, launched just a year ago, after customers complained about the voice-recognition software and wind noise. VW has changed parts along the door opening and in the housing of the side mirror to reduce noise, and it has revised the software.

When owners said it was hard to adjust the Jetta's seats, VW went back to its supplier and designed a new system with levers in the front that will be installed in cars within a year - half the time it previously took to make such a change.

"The group, all the way from [CEO] Martin Winterkorn on down, view this market as key," said Marc Trahan, executive vice president in charge of quality at Volkswagen Group of America.

Volkswagen aims to roughly triple its U.S. sales by 2018, when it hopes to be the world's biggest, best and most profitable automaker.

Its VW brand, accounting for 257,000 vehicle sales in the United States last year, is expected to lead the way. In addition to the new Jetta, entirely redesigned to conform to American tastes, VW is rolling out an all-new and more affordable Passat midsize car and a new Beetle.

VW's strategy has been not only to align its cars and prices to compete directly against the top Japanese brands, but also to match their reputation for quality.

The VW brand scores well in customer-satisfaction surveys, such as Strategic Vision's. But in J.D. Power and Associates' widely watched annual quality surveys of new and three-year-old cars, VW consistently falls below the industry average.

"The ding on Volkswagen is that it's often said that their vehicles are expensive to fix, and they're not as reliable as they could be," said Ed Loh, executive editor of Motor Trend magazine.

VW engineers have worked hard to reduce defects, but some executives tended to dismiss complaints about the size of cupholders and other such quibbles as American peculiarities.

But now Volkswagen managers here and in Germany, too, are taking a fresh interest in the mass of data and customer feedback available in the United States - from the exhaustive Consumer Reports and other surveys, to warranty data. Warranties in the United States tend to be longer than in other countries, partly because of regulations.

"What you have here in this market is a level of transparency you don't have anywhere else," said Trahan. By harnessing that information, "we can improve the brand in every market we compete in, and the group recognizes that."

Volkswagen is instituting many of the changes it's making for U.S. customers at its operations around the world. The new seat adjustment levers, for instance, will be installed on Jetta cars in all other markets.

VW has retained J.D. Power consultants to conduct monthly surveys of new customers to spot problems fast and raise its quality scores.

"They are learning how demanding it is here and putting into practice the demands of the North American market," said Jack Nerad, industry analyst at Kelley Blue Book, the used-car pricing specialist.

VW's dealers are relieved that the automaker is taking a greater interest in this market, where the company has invested $4 billion and built an assembly plant in Chattanooga.

Eddie Lee of VW of Corpus Christi, a Texas dealership, says VW's management is much more aware of what's happening now. "One thing about Jonathan Browning," Lee said of Volkswagen Group of America's chief executive, "is that he tracks and measures everything."

Some dealers grumble that VW's push to please its American customers is putting a burden on them. Others are guarded, having seen many short-lived VW initiatives and managers over the years. Browning has been in place one year only.

But some of the hard data show a steady improvement at Volkswagen of America despite the outward upheaval. Warranty costs, for instance, have fallen every year since 2005, VW says.

The proportion of dealer visits that entailed repairs of VW vehicles has fallen to 31 percent - better than the industry average - and down sharply from 62 percent three years ago.

"I've been with Volkswagen many years," said Look, who has a store in Waterloo, Ontario. "It's the first time in many, many years that I see VW's commitment to this market."

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