Any doubt whether Volkswagen has lost its way in North America all but vanished this week when the company’s top labor boss blasted its U.S. strategy.
Bernd Osterloh, head of Volkswagen’s works council and a member of its supervisory board, told reporters in Germany that “the situation in the U.S. is a disaster.” He said the company wasn’t likely to meet its goal of selling 1 million vehicles in the U.S. by 2018 and its struggles will continue in the country for at least two more years. “The worm has to taste good to the fish, not the fisherman,” Osterloh told reporters. “Sometimes I have the impression that it’s the other way around with us.”
You know things are bad when a top company official—and labor leaders in Germany help steer corporate strategy—likens his product to worms. But Osterloh’s tough love is a common refrain among car folks, albeit a particularly public one. At the Detroit Auto Show last week, I heard Volkswagen referred to in separate background conversations as “egotistical,” “expensive,” “boring,” and “Soviet”—not the type of brand associations a marketer might shoot for.
Still, nobody I spoke with knocked the company’s engineering prowess or the quality of its cars. Its issues, according to Osterloh and others, are tied to a slightly stale product line without an affordable small SUV, one of the fastest-growing model segments in the U.S. at the moment. Mark McNabb, the company’s new chief operating officer for North America, said the company is squarely focused on reinventing its Tiguan, a small SUV that he suggested will become affordable. He also said there are a lot of parts of the U.S. where Volkswagen has room to expand its sales efforts.
As for the recent performance, McNabb blames a wave of new cars from competitors and a tide of incentive and advertising dollars. “Everybody is getting squeezed, to be honest,” McNabb said in Detroit last week. “It’s much more competitive than it was two years ago or three years ago. … It’s natural-cycle stuff, but it’s become much more aggressive.”