Volkswagen's Pablo Di Si: Time to get ‘back to basics'

Volkswagen Group of America CEO Pablo Di Si has officially been on the job only since September, when his predecessor, Scott Keogh, moved over to develop Scout Motors. The Argentinian previously worked in the U.S. for VW, but had been running the brand's operations in South America when he got the call to move back here.

The 53-year-old executive sees great growth potential for VW in the U.S., and believes that its electric vehicles will help the company increase its market share in what is becoming one of the German automaker's most important markets. Di Si believes it is important that VW's North American region carve out its own identity and make its own market-based decisions. He's already taking steps to speed up VW's time to market and make sure that the products sold in North America match consumer interests here.

Di Si spoke with Staff Reporter Larry P. Vellequette this month. Here are edited excerpts.

Q: You took over from Scott Keogh in September, so you've been on the job for about nine months. What did you expect coming in, and what have you found?

A: Well, I had lived in the U.S. previously for 16 years, but the business has changed dramatically since I was here. So what did I learn? I learned that in the U.S., the legislation is far more complex than in many other countries, because you have these federal and state regulations.

I've been visiting dealers at least once per month and, for me, that has been a quick learning curve on the state of the business — how do the leases work, particularly with the interest rates, what are the preferences of the consumers? We also did some customer clinics, so it was really good for me to listen to them through the dealer network, but to hear from actual consumers who purchased vehicles as well. It's been a good learning journey that I'm still on. And obviously, I'm also learning about our own organization, because each organization is different. We have a huge, complex machine, and a really good team.

You just did a series of dealer meetings with the VW network. What did you hear from them?

I'll tell you what I told them two months ago and what has happened in the last couple weeks. So I said, "Listen, we're going to increase production significantly." And they look at me [skeptically]. But today, production is up 36 percent quarter-over-quarter. That's something called a team, and whether it's purchasing, whether it's production, whether it's logistics, there are people behind it, so I'm really pleased and proud that the team is delivering.

That was one significant change. The other one is that despite the interest rates and despite all you read in the newspapers about recession and this and that, the North American market grew 9 percent — which in my book is outstanding — but we grew 11.5 percent. So again, I give the credit to the team that we have the production and then we have the retail. Now obviously, the market is changing. Other competitors have more product availability. I'm not saying it's going back to normal, because I don't think it will go back to normal to have those high levels of inventory, but I think that we need to eat our lunch.

We need to go back to the things that we lost as an industry over the last three years and go back to the basics. Let's do financing. Let's do the leases to specific programs and specific cars. Now more than ever, we need to be connected to our dealers, right? The dealers need to tell me what they need, and maybe I agree, maybe I disagree. But let's continue that dialogue because now we need to change the mix, we need to change the volumes, we need to change the regions. I'm pretty happy on how the communication is going with the dealer network, and I'm positive overall.

Did you get specific feedback from them about things that they want to see?

I invited them to the customer clinics. These vehicles have been in development awhile, so they've seen them before, but we still have time to make changes. We talked a lot about product strategy, consumer preferences and, of course, we've been discussing how electrification is coming strong, especially now with the Inflation Reduction Act. They were thankful that they participated in these meetings, and then of course they asked for more competitive lease rates. I told them that we are going to have to talk to the Federal Reserve Bank and see about that.

Let's talk about Volkswagen Credit. You've indicated that you wanted to see it become a more active partner with your dealer networks. How is that project coming along?

We're changing the management of Volkswagen Credit as of June 1. I'm going to visit the dealers again, with Volkswagen Credit, myself. We're going to go with one voice to have a strategic mindset. We're going to create some programs. Maybe it's not everything that the dealers might want, but it should be a significant improvement versus what we have today.

That's interesting. So what do you see as the biggest opportunity to improve Volkswagen Credit? Is it floorplanning? Consumer programs?

I'm not so much concerned on floorplanning because, to be honest with you, we're managing the inventories from end to end, so we have full visibility of inventory at retail, inventory in the pipeline, inventory in the factory — whether it's finished goods or work in progress. I think one of the keys for business is to manage that pipeline and make sure that the dealer network has enough product, but not overstock like in the past as an industry. I don't want to start pushing, but I want to start pulling — I want the dealers to start pulling, so they don't get caught with extra stock.

That's on us, and the discussion with the dealer network is keyed on what's selling good and if we have problems so that I can adjust immediately. I think we, as an organization in North America, we gained a lot of muscle over the last couple of months and it gives a lot of credit to the team here. It's not been an easy ride, but we're moving along.

How do you mean?

I think the focus should be on the retail programs on the commercial side. What strategic decisions do we want to make and with what products? Obviously, having an ID4, manufactured in Chattanooga with the complete Inflation Reduction Act credit — we're the only foreign OEM that qualifies for the tax credits for purchases, and we need to market these extensively over and over and over and over with communication, advertising and so forth.

On that topic, let's talk about VW's certified pre-owned program. It's been robust for a while, but the dramatic drop-off in leasing because of higher interest rates is making it more difficult for dealers to get vehicles to certify. Is that something that needs to be dealt with?

Market is market, right? I don't see the falloff as that dramatic. Obviously things are changing with certified pre-owned. But you need to go to the brand value and how you manage your return, right? It's a full circle. If I start decreasing prices on my retail, then my CPO will go downhill, and you need it. You need to look at the entire side.

We're maintaining our pricing discipline, and not only are we maintaining our pricing discipline, but also when you look at the CPO and the way we manage, also with Volkswagen Credit, we need to be consistent, right? So we're making some adjustments. But it's not dramatic because of our own internal policy of pricing and stability. So you're not going to see, at least under my watch, any movements going up or going down dramatically. This is not good for the dealers, for the consumers or for Volkswagen. So we need that stability, we need that stable market.

Affordability is becoming a nagging industry problem. How big of an issue is affordability for your dealers and what can you do to address it?

Let's start with the electric vehicles, and then let's talk about the Jetta. The ID4, not only do we manufacture it here in the U.S., but it's one of the most affordable vehicles in the electric space, especially with the Inflation Reduction Act credit, and in some states, there are additional credits available that can push the starting price below $30,000. Over the last couple months, I've visited a lot of dealers not only in the U.S., but in Canada and Mexico as well. One of my many questions in all those places I visited was: "Do you want more Jettas? And if you do, what's the price point?" And I said, "Give me a real price point, not $100." But the discussions were really good. So we're going to have a push in the second half of the year on the Jetta, with affordability, production, because it ties in with our brand values.

The Jetta is a great entry product for the family. When you look at the life journey of the consumer in our brand, that entry point is critical. I still get a lot of comments from consumers, "My son had a Jetta or, I drove a Jetta." I have two teenagers; I bought them a Jetta, because first, it's safety, and second, it's an affordable car with great engineering, and they can have a great experience with the brand as a first vehicle. So you're going to see a lot of marketing push from us as an organization on affordability, both with the ID4 and with the Jetta.

Speaking of product, are there holes in VW's U.S. lineup that need filling?

Nobody's perfect. We have some, but we're spending more time on speed to market. I need to fill the portfolio. But it needs speed. In terms of EVs, I think we have a robust portfolio going forward: The ID4, the ID7 sedan is an incredible product, and it's only going to be a couple of months from now that we launch it. The IDBuzz is still generating massive consumer interest, and it launches next year.

When you look at our brand, on the EV portfolio, I think we are good. Can we be better? Yes, sure. But we're robust. We have a strategy. We're implementing the strategy, and the moment is now. However, I need to accelerate the additional cars in our timeline, so I spend a lot of time with our team, talking about technically, how can we accelerate some of these great projects?