Cute is not enough to increase U.S. sales.

Volkswagen of America, Inc. announced today that it has selected Deutsch LA as its new advertising agency of record for the U.S., replacing Crispin Porter + Bogusky of Miami.

It was the third VW advertising agency in less than five years.

Deutsch previously worked for GM’s ill-fated Saturn division.

Crispin et al, an ultra-hip shop from Miami and Boulder, elected not to participate in the agency review ordered by VOA’s top brass.

The latest change, as the one before it, raises questions about where the problem lies. Could something be amiss in Germany?

Deutsch LA will have full advertising responsibility for the Volkswagen brand and its family of products, effective November 1, 2009, and will be responsible for all national and retail advertising, including digital and “experiential” marketing.

“Deutsch LA proved they have a firm grasp on how to manage the complex challenges we face in achieving our significant growth objectives,” said Tim Ellis, Vice President of Marketing, VWoA.

“Of equal importance, they inspired us with a big, compelling, creative idea that will energize and motivate our passionate base as well as attract a broader group of people who have thus far not considered Volkswagen as a relevant choice.”

We shall see about that. Advertising is a world filled with hype, piled on top of previous hype.

The sales and business problems VW faces are real, though. Once dominant in the U.S. market as the leading import when the Beetle was king, it is now a mere footnote to the combined sales tables of Japanese and Korean automakers.

In its latest response to the usurpation, VW is now readying a new factory in Chattanooga, Tennessee, which it hopes will be critical to what it says are “aggressive growth plans” laid out by Stefan Jacoby, CEO of Volkswagen of America.

A previous foray in the U.S. in 1978, which established manufacturing for the Rabbit — the Beetle successor — in Pennsylvania,  failed.

Jacoby’s primary goal is to boost sales of the Volkswagen brand to 800,000 by 2018 – more than double current volumes. (VW Group’s Audi brand is targeting volumes of around 110,000.)

Critics point out that VW does not compete in large segments of the U.S. market, including SUVs and pickup trucks, making such a stated goal vulnerable to charges of corporate puff or that it is attempting to publicize its stock based on press releases, not showroom reality.

The factory will build, among other models, an all-new mid-size sedan that VW hopes to use to challenge the segment’s American sales leaders, Toyota Camry and Honda Accord.

One VW cited potential advantage is that the facility will largely take exchange rates out of the equation. With the weak dollar growing weaker for the near future, German imports have an ongoing disadvantage.

However, Toyota produces its Camry models in the U.S., as does Honda its  Accords, and both have been  doing so for decades. So it is going to take more than exchange rates for VW to increase sales significantly here.

“Volkswagen probably has the best fifty-year portfolio of advertising that exists. And as far as the other agencies in the review, we felt like we were up against Mount Rushmore,” said Eric Hirshberg, Co-CEO/Chief Creative Officer of Deutsch LA. “The fact that they chose us to carry on this legacy is simply humbling.”

Well, we agree on that.