Should Volkswagen Leave America? (Update: VW American CEO Leaves)

Update: Michael Horn, the chief executive of Volkswagen Group of America has left the company to “pursue other interests”

It is a radical idea, but one Volkswagen’s management must have considered, if only briefly. The German car company has less than 2% of the U.S. car market, and the emissions cheating could cost it billions of dollars in America alone.

For VW to exit the United States, it would have to maintain a network of service centers for people who already own its vehicles. And the network may need to be in place for years, although at some point VW could shrink it. In the meantime, VW may have to compensation current dealers for abandoning them. That would be a fraction of what it would take to reverse a slide in VW’s sales, and eventually an attempt to rehabilitate its reputation in the United States. The rehabilitation could take years, and it may well be unsuccessful.

An exit from the U.S. market would not help its legal situation, though.

VW only sold 42,300 cars in the first two months of the year, off 13.2% year over year. It market share has dropped to 1.7%. VW’s plan was to extend its modest model line as a means to capture more customers. That will not happen, at least for some time. At this point, VW only has five model lines. Sales of its flagship Passat dropped to 4,380 for the first two months, off 30.6%. The only model with a substantial gain was the Tiguan sport utility vehicle, the sales of which rose 78% to 3,245.

VW would have to keep its management team in Herndon, Va., and its network of marketers who work with dealers. It would need to sharply increase its advertising budget, which for the time being might only staunch bleeding and not have a positive effect until far into the future, if at all.

VW has massive work to do to keep its sales in  major markets, particularly Germany, Europe and China. It cannot afford to fight a war on a number of fronts. It was losing in America before the scandal. Abandoning the United States would give it one less headache in a market in which it was never successful.