TM Toyota Motor Corporation

LAS VEGAS—Volkswagen AG's management extended an olive branch to car dealers hit hard by the German auto giant's emissions-testing scandal. Much of what dealers wanted to hear, however, went unsaid.

Herbert Diess, head of the Volkswagen passenger-car brand, met with hundreds of dealers for 90 minutes at an annual conference in Las Vegas last Saturday.

The crux of his message: Volkswagen aims to be a mass-market player in the U.S. market, willing to chase volume at the expense of exclusivity.

The executive vowed to "redefine" the company's tarnished image and "relaunch" the Volkswagen brand.

Volkswagen will fast-track much-needed products, Mr. Diess said, so dealers can begin recovering from a punishing sales slump endured over the past six months.

Substantial attention during the discussion was given to a new Alltrack wagon, an all-wheel drive vehicle due later this year to rival the red-hot Subaru brand. Sport-utility vehicles are also on the horizon.

Production targets for the Alltrack, slated to be built in Mexico, have been doubled.

Initial plans called for 8,000 Alltrack deliveries this year and 30,000 in 2017; dealers, however, demanded delivery of 75,000 all-wheel-drive vehicles next year.

Still, Mr. Diess said in an interview he couldn't give specific details about efforts to address the legal, financial and commercial ramifications of a scandal related to years of cheating on diesel-emissions tests in the U.S.

Disclosed by the Environmental Protection Agency in September, the emissions scheme led to a management shake-up on several continents and is expected to cost the company billions of dollars to repair.

The lack of information on reparations and financial reimbursements has soured relations with U.S. dealers, many of whom have invested heavily to stock car lots with ample inventory.

Volkswagen is in discussions with U.S. authorities and other regulators about resolving the problem.

In addition to facing fines, the company needs to fix cars on the roads with higher diesel emissions than legally allowed and figure out a way to gain approval to start selling big volumes of diesel cars again. Sales have plunged in the wake of the scandal, falling more than 12% in the first three months of 2016 compared with the first quarter of 2015.

Volkswagen has dueled with Toyota Motor Corp. for the No. 1 global auto maker crown, but its namesake brand's U.S. market share trails every mainstream rival.

Many dealers have expressed frustration with executives in Wolfsburg, Germany, where Volkswagen is based.

For years, Volkswagen dealers and some U.S. executives have criticized senior managers for not paying attention to American buying trends and for ignoring feedback.

Earlier this year, Michael Horn—a U.S. sales chief well-liked by dealers—left the company with little explanation for his departure, further upsetting retailers.

Mr. Diess's remarks to dealers included an expression of gratitude for patience during tough times. He said the company aims to sell more cars in the U.S. than ever before, signaling a move away from being seen as an elite European brand.

In a news conference following the meeting, several dealers applauded Mr. Diess's speech. Mike DiFeo, who owns dealerships in New Jersey, said Volkswagen needs to carry "price-competitive" vehicles alongside a promise of delivering "German engineering."

While the company is taking a breather from advertising diesel technology, instead focusing on gasoline engines and future plans for electric vehicles, dealers said the company eventually needs to return to touting diesels.

Mr. Diess's speech was preceded by a meeting held by hundreds of independent dealers without company executives in the room.

During that two-hour meeting, many dealers voiced frustration, but there was a general agreement to continue working with Wolfsburg and be patient for financial settlements and other reparations, participants told The Wall Street Journal.

Dealers then joined Volkswagen brass for a Friday evening party.

It was unclear if Mr. Diess's actions would persuade a smaller group of dealers to drop threats to sue the company.

Leonard Bellavia, an attorney who says he represents smaller dealers unhappy with Volkswagen managers, said several of them were ready to file a lawsuit.

Jason Kuhn, the head of Kuhn Automotive Group in Florida who helped spearhead the closed-door meeting Friday, said he couldn't speak for all 650 U.S. dealers.

Still, the broad sentiment suggests "we would much prefer to take a tack of working collaboratively…these are going to be our partners for a long time to come."

Alan Brown, chairman of Volkswagen's dealer council and operator of two Texas stores, cautioned "we're not fixed yet."

Write to John D. Stoll at john.stoll@wsj.com

(END) Dow Jones Newswires

April 03, 2016 20:35 ET (00:35 GMT)

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