Volkswagen of America has spent decades under the watchful gaze of its German parent in Wolfsburg, like a teenager anxious to be treated as an adult: always dependent, always being told what was best, almost always misunderstood.
No wonder there’s been some angst.
But in a major milestone this month, and as a concrete sign of growing trust, VW of America was handed the equivalent of the keys to the family car.
Not only was VW’s North American arm granted greater autonomy over what products to produce in the region and how to do so, but it was given resources to carry out those decisions in the form of $7.1 billion in investments over the next five years.
And those announcements came just days after top VW Group leadership in Germany turned to North America and China to shoulder more production and sales while Europe struggles through the immediate effects of the Russia-Ukraine war.
“It allows us to be faster,” explained Scott Keogh, now into his fourth year as CEO of Volkswagen of America. “I think that’s a lot about what the $7.1 billion [investment] is about. It will also allow us to make the decisions that are right for the market.”
What might those decisions be? For starters, one might be bringing a long-speculated VW electric compact pickup to the U.S., or it might mean building a larger American version of the ID Buzz here alongside ID4 compact crossovers. Regardless of what they are, the decisions have to make business sense, Keogh said — but they are largely now his decisions to make.
“Let’s call it ‘the math’ still needs to make sense; it’s still the automotive business, so you need scale, you need efficiencies and you do a proper business case. But yes, we can do those things regionally,” Keogh said.
What changed? Well, in simple terms, VW of America grew up.
After years of losing money, and after the disastrous diesel emissions scandal, VW of America had “an $800 million swing” to the good in 2021, Keogh said. Its network of 638 dealerships averaged a 4.5 percent return last year — about triple their historic industry-lagging profit margin. U.S. sales climbed 15 percent in 2021 to just more than 375,000 vehicles, 73 percent of which were more profitable crossovers instead of less profitable sedans, as had been the case in years past. U.S. market share for the VW brand was 2.5 percent, and it is likely to climb higher as production in North America increases because of microchips being diverted from Europe.
Like a teen doing their chores without being asked, those results all got noticed in Wolfsburg.
“If you look at the business in general, we were historically, let’s say, a simplistic import business. Then the import business basically stayed an import business when we built plants in the region because we were basically a sales and marketing entity,” Keogh said. “Over time, we’ve moved to take full responsibility — that includes the purchasing, it includes the engineering, it includes the production.”