According to AdAge, German automaker Volkswagen fired ad agency Crispin out of a desire for "domination" and tripling of U.S. sales. Jahwohl! Vee agreeh! Max zee Beetle eez maybe not zee right car fahr zee sales domination. [AdAge]
The problem I've found in my experience with advertising companies is that most are self-serving. This means that far too often they're not doing what's best for their client, but rather what's best for their own portfolio. The rationale is that the bigger splash they can make with quirky ads the more likely they are to land big clients. From what I've seen, those weird memorable ads don't necessarily lead to improved sales.
As for VWs reliability issues, it's really par for the course with European brands. Europeans still excel in terms of driver feel and quality, however every European brand in the US is known for having issues and almost always rank low for reliability compared to all other American automakers. However, compared to other European brands which are no available in the US, like Alfa Romeo, Citroen, Fiat, Renault these brands are actually quite good. The thing is that the Japanese have really raised the bar in terms of reliability.
If VW is serious about taking the top spot they're going to have to work hard to address reliability. Honestly, I don't see it happening because it will require some significant changes in engineering and especially labor.