Please Bear With US While We Recalibrate Our Offer

As Skoda readies its ursine SUV contender, we ask can it adapt to the North American landscape?

Kodiaq Image: autoexpress
If you go down to the woods today… Kodiaq Image: autoexpress

News that VW Group senior management are seriously evaluating Skoda’s entry into the North American car market is significant yet unsurprising. In many ways, it’s difficult to understand why it hasn’t happened before. After all, the US market tends to favour no nonsense cars and US success would raise Skoda’s and therefore VW Group revenues. And heaven knows, they need all the help they can get right now.

A number of factors have conjoined to make this an apt moment to migrate the Atlantic. Firstly, VW’s US woes predate NOx-gate by some margin. VW’s push into the US stalled, owing to a lacklustre offering in the big-selling medium sedan sector – (the US-only Passat model being ill-regarded by press and public) – and a lack of suitable SUV/crossover offerings. Quality and durability also fell short of expectations – another function of the ‘decontenting’ deemed necessary to allow VW to compete on price.

Secondly, a year on from VW’s admission of emissions defeat, the German car giant is little closer to a solution, much less an exit to the reputational mess they find themselves in – particularly in the World’s second largest car market. It’s likely to take brand Volkswagen a generation to put this mess behind it – and even then its only chance of succeeding is a root and branch reinvention of the brand, its values and its positioning.

A third factor in Skoda’s favour is that for the first time since its highly successful rebooting under VW’s loving embrace the Czech marque offers a full range of cars and is now about to launch a commercially significant large SUV in the forthcoming Kodiaq model. Previously, Skoda’s US offer would have been at best, patchy. No longer.

On this basis, surely VW should be pushing the Czech Republic’s finest for all they’re worth? Well, not so fast Matthias. Earlier this week, Automotive News reported Skoda management are still evaluating the potential of a move Stateside and will make a decision late next year. Why wait? Well, Skoda is virtually unknown in the US so before making such a huge commitment it’s probably prudent for them to carry out some robust market intelligence. Additionally, to comply with US regulations, all relevant Skoda models will require engineering changes which could require lead-times that run into years rather than months. With diesel propulsion off the menu, an appropriate range of power units will be required, which again require engineering time to attain market compatibility.

Another Kodiaq moment brought to you by motor-elpais
You’re in for a big surprise… Another Kodiaq moment brought to you by motor-elpais

From a supply, distribution and sales perspective, things look slightly easier. VW’s US dealers have had a torrid time over the past twelve months as inventory has piled up, cars have become unsaleable, costs have spiralled and profits have been slashed. Last month, VW agreed a $1.2bn compensation package aimed at rebuilding relationships with their embattled US dealers, many of whom have invested $millions in their franchises, only to face ruin. According to recent press reports, this settlement brings the total compensation paid by VW in the US since the emissions scandal broke to a staggering $16.5bn. And they’re not out of the woods yet – in fact it’s increasingly likely VW will be tied up in expensive litigation for some considerable time.

Surely then it’s possible an untainted Skoda offering well engineered, attractively designed cars with a value proposition could offer American dealers with a lifeline – especially since the core VW brand itself seems likely to remain toxic for years to come. But while Skoda has been ‘simply clever’ enough to make the economics work elsewhere, it isn’t written in stone they can pull it off in the US. Another barrier is the cost of promoting Skoda to a nation for whom the Czech Republic, despite a noble heritage in this arena isn’t exactly synonymous with the motor car. There’s no guarantee that Skoda would be an easy sell, especially against opposition like Toyota, Hyundai and the domestic marques.

But what this proves for Skoda is that it has finally come of age as a respectable marque and frankly, wouldn’t it be ironic if this once laughing stock ended up saving the parent company’s bacon? Success in the US could give VW sufficient breathing space to put clear water between pre-scandal Volkswagen and the new, cuddlier, alternative propulsion brand Matthias Muller and his cohorts hope will steer them out of the quicksand.

Will it happen? Probably. Should it happen? Well, it’s as good an idea as there seems to be in Wolfsburg’s corridors of power right now. When will it happen? I’d give it about eighteen months – about enough time for the new US-friendly Kodiaq model to gain sales and production momentum.

Author: Eóin Doyle

Founding Editor. Content Provider.

24 thoughts on “Please Bear With US While We Recalibrate Our Offer”

  1. Regarding type approval, I’d be confident that VW have all the preparatory steps for US sales built in. Nothing would have to be re-engineered rather merely finished.
    Importing Skoda might work; it might also leave VW with two brands fighting instead of just one. A better idea would be to sell Dacias.

    1. Isn’t Dacia part of Renault? Have I misunderstood your point?

  2. Does the US need another car brand? Wouldn’t VW do better spending the money needed to establish it on propping up what it markets already?

  3. SV: I was being a bit facetious. There’s a touch of panic in trying to sell Skodas in America. As you said, put VW right first. Fix the reputational damage, improve quality and soothe the dealers. They have to do this anyway and its a huge task; adding a new product line is another huge task.

  4. Skoda? Here? German, sorry, Czech design, quality control, product support and understanding of the market contending with well-established manufacturers?

    Wolfsburg is still the capital of cloud cuckoo land.

    1. Eóin, your treatment of Skoda as autonomous is puzzling, especially since Skoda is a division of a company that’s too centralized and top-down for words.

      The same goes for the treatment of GM’s divisions as stand-alone companies in discussions here. Its fun to pretend they are, but GM — all automakers, come to think of it — are highly centralized. I understand that they try to treat their brands as, well, independent but the reality has been otherwise at least since Alfred Sloan saved GM. Capital and decisions about how to use it come from the top, not from the periphery.

    2. Fred: Thanks for your comment. I have to say I’m slightly puzzled – in that I can’t quite identify where I suggested Skoda were in themselves autonomous or indeed acting in that manner. My opening line states that VW senior management are seriously considering introducing Skoda to the US – as has been widely reported elsewhere.
      Automotive News – (an American publication I believe) – were the ones suggesting it was Skoda management who were weighing options – I simply quoted them in that instance. If it clarifies matters for you, I’ll insert the direct quote.

      I think I may have suggested in previous posts that Cadillac management made a decision or two along the way. Perhaps that comes across as simplistic – but I’ve tended to assume readers will understand the distinction. But yes, in organisations as large and centralised as GM or Volkswagen, it’s pretty obvious (even to me) who’s calling the shots.

      You mention Czech quality control. Skoda has a pretty good reputation for quality and reliability in Europe. It has – if I recall correctly – frequently eclipsed that of its parent. The Czech Republic also has a long and distinguished history of automotive design and manufacture. That it has a mountain to climb in the US is undeniable, were it to be offered there. There are clearly some preconceptions to surmount for starters.

  5. If I would be in Matthias Mullers shoes, I would take this not very european Kodiaq and put a Volkswagen or – if i want to introduce a new brand – a Seat badge on it.
    Schkodah has no reputation in the new world, it must be feared that Donald Trumps loyal Hillbillies will regard it as a car from behind the iron curtain.
    Well, these guys won´t take a car with a spanisch name either, but maybe there is a market for a cheap brand with “emocion” from Spain…

  6. Launching Skoda to the US does have the ring of something VAG would be arrogant enough to do. There is also absolutely no doubt in my mind that it does not have the faintest hope of being successful.

    Dieselgate has ensured that VW’s reputation in the US is toilet-level, and I mean that at a widespread public level, not just amongst people interested in cars. Even prior to that, I’m not sure it was stellar. VW hasn’t really understood the US market since at least the Beetle ,and it’s debatable they really understood it all that well back then. The fact the current designed-for-the-US Passat has tanked was entirely predictable, and predicted. There is really no reason to buy a VW in the US unless you truly value a European, and specifically German, approach to vehicle dynamics and design. Sure, there is a market for that. Thing is, it is and will remain a niche market. Volkswagens in the US have a decidedly unimpressive reputation for reliability. The idea that an Americanised Passat would appeal to both VW loyalists and Camry/Accord/Sonata/Big 3 buyers to justify the sort of volumes being projected was VAG hubris at its finest. I am pretty much VW’s perfect target buyer and even I wouldn’t look at a Passat over an Accord or Mazda 6.

    Skoda’s relaunch in Europe was successful off the back of the notion of cut-price ‘German engineering’. In the US, the notion of German engineering is widely viewed as a punchline, and VW is not seriously regarded by anyone other than VW America managers as even a mildly upmarket brand. Different to the Japanese and locals, yes, but not more prestigious in any significant sense. Where is Skoda supposed to fit in this landscape?

    Apart from all that, VW of America is soon going to have this niche covered anyway:

    http://truckyeah.jalopnik.com/this-looks-like-volkswagen-s-new-big-suv-and-it-might-b-1786246625

  7. Do our North American readers have any insight on why the Europe-market Passat is inappropriate for the US market? I have to keep reminding myself that the cars we get in the EU are not the Veedubs sold west of the Atlantic ocean. For American readers, VW has a much envied reputation for design, quality of build and durability. While they inexplicably aren’t held to be as good at these things as Benz/Audi/BMW they are seen to be “obviously” better than Ford and Opel (who are also essentially German).

    1. I live in the States, though automotively speaking, I am schooled in European sensibilities (and hail from the Antipodes). The short answer is that aside from a few products like the GTI and perhaps Sportwagen, I can’t see why you would buy a VW unless you were a died-in-the-wool fan. The GTI has its own niche and the Sportwagen offers up a formula that you can’t readily find elsewhere here; aside from that, however, it seems to me that every other product has equivalents elsewhere for less. This is before you get to the minor matter of quality and post-dieselgate brand equity. The Passat, in particular, is IMO hard to make a compelling case for given the current Japanese competition – the Accord is certainly no great shakes visually, but that is also true of the Passat.

    1. It’s a bit longer and wider than the Euro car, and until recently ran the deeply unpleasant 2.5 inline five that VWoA insisted on infecting pretty much everything with. It’s also built in Chattanooga. I can’t speak from experience but I gather there have been complaints that the material quality in general isn’t up to the Euro version – that is certainly true of the current NA Jetta, which ditches the Euro multilink rear suspension in favour of a torsion beam. None of that, however, would be any big deal – none of its competitors are rewriting the powertrain or interior quality rulebook. It seems to me the problem is that the oily bits have a reputation for going wrong, and expensively. This is a pretty typical take:

      http://www.businessinsider.com/why-americans-arent-buying-volkswagens-2014-7

      “For much of the past decade, Volkswagen has been plagued with powertrain reliability issues in the high-volume four- and five-cylinder engines that power Passat, Jettas, and other VW products, according to Consumer Reports.

      “In the past few years, the automaker has made significant strides in quality and recieved high marks from reviewers at the publication.

      “Still, there seems to be a stigma that lingers in the minds of mass-market shoppers who place a premium on reliability. This stigma is further enforced by publications like JD Power’s 2014 initial quality and vehicle dependability surveys, where VW scored below industry average in both.”

      It must also be said that this largely reflects my anecdotal experience with VAG products, certainly in the last 20 years. I’ve never owned one but there are plenty enough horrors stories around. A colleague of mine in Australia was stuck with a 10k out-of-warranty gearbox replacement cost on a Golf three months ago, having bought into the German engineering myth. It hardly needs to be said they’re going Japanese next time.

  8. Simon: nobody complains about the 3-series. It’s small and expensive.
    I looked at the US Passat. It’s very Buick-y. The reviews say its quite good and quite American.

    1. But this is just the point. Why would anyone buy a VW with a questionable reliability record that is trying to be Camry-like? It doesn’t please the brand loyalists (who like VWs because they want something akin to what is offered in Europe), and there isn’t a compelling enough reason for anyone else to take a punt when the competition fulfils the requisite brief for a family sedan to the letter.

  9. Funnily enough, the newer VWs sold in North America are actually rated better by Consumer Reports for reliability than the old rubbish pre 2010 or so, though still not stellar. The newish NA-only Jetta has been saddled with torsion beam or independent rear suspension depending on year, model and whim – the latest ones (not being sold) with the diesel engine had to revert to torsion beam to accomodate the emissions gubbins. The NA Passat seems OK, but suffers from the VW view that US customers just want maximum size for the money and little else due to the obvious lack of sophistication of the rubes that inhabit the land. Arrogance personified. And sorry, I don’t believe Euro VWs are any better made – the firm has managed to hypnotize the masses there, whereas just about any Ford or Opel is probably more reliable but doesn’t have the “badge”. I read Pistonheads myself, and see no sign that VW is a quality motor except in the preformed prejudices of the poster who often gets shot down by his peers.

    This superior attitude extends to the way that VW feels it has been treated by the US authorities over the NOx situation. One must recall that the NOx “fix” for Euro EA189 diesels was a transparent engineering scam, yet approved by the German Transport authority but uninteresting to a dull public who assume VW engineering walks on water. It didn’t wash in the US, nor did their second proposal, leaving the suits in Germany bewildered at the lack of bootlicking they have been shown there, unlike the way the German authorities have rubber-stamped the useless “fixes” VW proposed and is now implementing. Due to the Type Approval in the EU, a German “fix” applies to the other hapless EU member countries as well with no recourse. Matthias Muller attempted to bulldoze his way past the EPA last winter when he visited and was rebuffed, and after he had made stupid remarks at a big car show. All this has been on TTAC.

    There is a completely different type of approval in the US. None of the set-in-stone specs required in the EU Type Approval for each model, often tested and completed by what seems to be dodgy “independent” labs set up to make money wherever it’s cheapest to do so. Rather, in the US the manufacturer can sell anything they want if they guarantee it meets the applicable regulations, including corporate average fuel economy, CAFE, and if the latter isn’t fully met, each offending model has an excise duty added known as the gas guzzler tax. Not every model is checked by the EPA or NHTSA every year, but it had better meet the regs when it is in fact tested. This is the hole VW dragged itself into, at times complaining that it didn’t translate the regs properly into German, sorry, and so got it wrong. Other infantile excuses and outright lies have been floated by VW since last Sept 22. Example: the engine meets its lab specs and anyway who said the lab performance had to also apply on the road, where does it say that? Example: Our 3 litre diesel has no deceptive programming – this was soon found to be a lie, and indeed when VW admitted that and said that was it for the cheap tricks, further skullduggery was found for a total of three separate cheats.

    If you were US authorities, both at state and federal level, and you had this lying bunch of suits telling porkies to your face, is it any wonder VW got the book thrown at them, and finally had to promise to buy back the diesel cars because they are incapable of being fixed? And then just two days ago, a German VW engineer responsible for diesel calibrations and who for some insane reason now lives in California (showing how little commonsense he has) was arrested and has turned state’s evidence on the scandal. One can expect to hear much more as the rats desert the sinking ship. Why on earth would a thinking person buy a vehicle from this bunch?

    And then the cheery bloke who runs Skoda thinks out loud, “Hey we can sell our semi-VW stuff in the US because we have a different name.” Unfortunately, the oily bits are the same – same poison, different bottle, and people aren’t stupid. Only VW Group managers are, and seem to operate on a limited set of ethics as well.

    I’d say forget the Skoda gambit and put the current ship in order. It needs a top to bottom overhaul.

  10. You appear to have accidentally inserted the word “no” into the third sentence of this article.

    1. Joe: maybe there could have been a hyphen as in “favours no-nonsense cars”.
      Looking at it satirically, do the US buyers favour nonsense cars? The huge SUVs are obnoxious; as a general phenomenon the gas guzzlers were horrible although they trumped today’s equivalence by dint of the visual variety and sometime beauty. In recent decades charm has faded away. My favourite American cars are not cars I like much absolutely. Maybe Lincoln’s space-hearse was nice and I naturally like Buick’s Lacrosse.

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