Volkswagen, With a New U.S. Leader, Aims for a Revival

Volkswagen is taking another crack at becoming a major force in the U.S. auto market, now that it appears to have put the worst of its emissions-cheating scandal behind it.

The German company’s sales plunged after it admitted in 2015 that it had engineered a scheme to help millions of diesel cars evade emissions limits. The company had built a growing following in the United States and elsewhere by claiming that those vehicles cut tailpipe emissions and traveled farther on a gallon of fuel than gasoline-powered cars. In reality, software in the cars deceived regulators about how much nitrogen oxide was being released.

On Wednesday, in hopes of accelerating its recovery, Volkswagen named an American executive instrumental in increasing sales of its Audi luxury cars to take over its U.S. operations.

The executive, Scott Keogh, who heads Audi of America, will replace Hinrich J. Woebcken, who reorganized Volkswagen of America in his three years as president and chief executive of Volkswagen of America. Keogh will be the first American citizen in that role in 25 years.

Volkswagen dealers welcomed the change. They pointed out that Audi’s sales in the United States more than doubled in the six years that Keogh, 49, ran the luxury brand. He helped position its cars in the same league as models from automakers like BMW and Mercedes-Benz.

“Scott’s a pretty intense guy, and he’s been instrumental at Audi,” said Jeff Williams, owner of Volkswagen and Audi dealerships in Lansing, Michigan. “Stability is the key with that brand. If he can bring some enthusiasm and stability, then I’m very optimistic.”

Volkswagen declined to make Keogh, who will take over on Nov. 1, available for an interview. Woebcken, 58, has not been named to a new executive role but will continue to advise the company.

The United States has long been a source of frustration for Volkswagen. Globally it competes with Toyota for the title of biggest carmaker, but it has little chance of cementing its supremacy as long as it remains a niche brand in the U.S. market.

The company, which once aimed to sell more than 800,000 Volkswagen-branded vehicles a year in the United States, sold about 340,000 last year. That was about 30,000 fewer than in 2014, a year before the diesel crisis, and roughly half as many as either Subaru or Hyundai. Sales of Volkswagen-brand models in the United States are up 5.5 percent so far this year.

Keogh will find it to hard to duplicate Audi’s success with the Volkswagen brand. As a longtime competitor to BMW and Mercedes, Audi could exploit affluent Americans’ affinity for high-end German brands. Volkswagen cars like the Passat, which the company makes at a factory in Chattanooga, Tennessee, have a much lower profit margin and compete in the shrinking market for sedans against more popular models from Toyota and Honda.

One of Keogh’s main tasks will be winning back the trust of customers like Derrick Oxender, a commercial-property owner in Ann Arbor, Michigan. He once owned a 2012 diesel Jetta and his wife still drives a diesel Audi Q5 sport utility vehicle.

“They lost quite a bit of credibility because they knew they were scamming on the diesels,” Oxender said.

His wife’s Q5 was modified to comply with emissions regulations, but Oxender sold his Jetta back to Volkswagen for $24,000 — only $3,000 less than he paid for it. He used the money to buy a Chevrolet Corvette. “I probably won’t go back to VW,” he said.

The scandal has set Volkswagen back years. The company pleaded guilty last year to felony charges in the United States and agreed to pay $4.3 billion in penalties. It also bought back most of the 600,000 diesels sold in the United States with the illegal software. The company was put on probation for three years, with a former federal prosecutor overseeing its compliance with ethics and regulatory measures. In May, U.S. prosecutors charged a former chief executive, Martin Winterkorn, with conspiracy and wire fraud in connection with the emissions scandal.

Keogh does have some advantages. Volkswagen has a lineup stocked with SUVs, a lucrative and increasingly popular segment of the auto market. Last year, Volkswagen added the seven-passenger Atlas, which is also made in Chattanooga, and redesigned the midsize Tiguan to make it longer and roomier to appeal to U.S. consumers. Volkswagen is preparing to add a compact SUV, and possibly a pickup truck.

In the past, Volkswagen relied on two small cars — the Jetta and the Golf — for much of its sales, but their appeal is fading as Americans gravitate toward larger, taller vehicles.

In a reflection of that trend, Volkswagen said last month that it would stop making the Beetle, the brand’s most recognizable model. The bubble-shaped car was a cultural sensation in the United States in the 1960s, went out of production in the U.S. market in 1977 and returned in 1998 when the company introduced the New Beetle, built on a modern-front-wheel drive design.

The company is also planning a line of electric vehicles.

“I like their chances,” said Matt DeLorenzo, senior managing editor at Kelley Blue Book, a market researcher. “They’ve moved into the whole SUV market, and those models are making up for the loss of diesel sales. And if they add some electric vehicles, that could really set them apart.”