By Christine Tierney / The Detroit News
Christine Tierney

New Volkswagen boss Wolfgang Bernhard will face a grumpy crowd in Dallas next month when he addresses VW's U.S. and Canadian dealers. The German brand is in a freefall in the U.S. market.

Last month, VW-brand vehicle sales tumbled 42 percent -- the worst performance of any major nameplate in the American market. (Taking into account two more selling days in May 2004, sales were down 37 percent on an adjusted basis.)

So far this year, its sales are down 25 percent. They fell 15 percent in 2004 to 256,111 -- less than half of the 1970 peak.

This isn't Bernhard's doing. The former chief operating officer of the Chrysler Group has just taken over Volkswagen AG's VW brand.

Its troubles reflect decisions made years ago. The lineup wasn't refreshed often, quality suffered, and the cadence of new launches was erratic. Two U.S. best-sellers, the Jetta and slightly larger Passat cars, aged together and are both being replaced this year, although they are built on separate platforms.

Instead of padding out VW's core U.S. offerings to fend off the Japanese, the automaker pushed VW upmarket with the Phaeton luxury car, although it already has a premium marque, Audi.

The recent rollout of the Jetta should have provided relief for U.S. dealers. It earned favorable reviews, but VW hasn't shipped enough entry-level, $18,500 versions that dealers can easily sell.

Over the next two months, as VW delivers more Jetta models and introduces the Passat, it expects sales to improve.

But VW probably lost a few thousand sales of the new Golf hatchback when it postponed its U.S. launch to space out the new model introductions. The first Golf will roll into U.S. showrooms two years after the model's launch in Germany.

"As I said to Dr. Bernhard, please don't do this to me again," said Len Hunt, head of Volkswagen of America and former chief of Audi in the United States.

"What you kind of want is a more consistent business," Hunt said. "We want something happening every six months."

Volkswagen lost more than $1 billion in North America last year but insists it is committed to the U.S. market. It has moved 100 engineers to its U.S. headquarters in Auburn Hills to spot defects and work with plant managers to fix them quickly.

VW recently forked out more than $50 million to tide over U.S. dealers with additional cash and bonuses. It is offering a $500 bonus on each used-car sale for dealers who hit sales targets.

But dealers want assurances from Bernhard that VW grasps the nature of the competition in the U.S. market.

"Every time I speak with him I feel that he has an acute knowledge of the U.S. market," says Hunt. "He knows what will work in America."

VW may add a small sport utility to the lineup, below the Touareg SUV.

Bernhard is expected to outline his priorities for VW: cutting costs, improving quality and creating exciting products. That's what dealers want to hear. They need more than a quarter of a million VW sales a year to see a decent return.