As one industry observer put it, Volkswagen dealers might be working within a “fairly sketchy framework” on how to handle about 500,000 diesel vehicles with compromised emissions systems the automaker has agreed to potentially buy back through various means based on negotiations brokered between the OEM and federal regulators.
A deadline-mandated preliminary agreement came to light on Thursday after former FBI director Robert Mueller served as moderator of the negotiations mandated by a U.S. District Court judge between Volkswagen and several federal agencies, including the Department of Justice, the Federal Trade Commission and the Environmental Protection Agency.
“A federal judge’s blessing of Volkswagen’s framework of a plan to take care of its customers is a long-awaited first step, but much more work needs to be done to flesh out the details in the coming months. Indeed, it is a fairly sketchy framework at this point,” Autotrader senior analyst Michelle Krebs said in comments sent to the media, including Auto Remarketing.
“Meantime, Volkswagen customers will have to stay patient a bit longer until all of the details of the compensation deal are hammered out,” Krebs continued. “Then they will have to carefully weigh all of their options, which include having Volkswagen buy back their cars, have them repaired if that is possible, or return their lease cars.”
Should all owners of the VW diesel models included in the controversy decide to give up their units, the impact in the wholesale market is difficult to project. That’s the assessment shared by ADESA chief economist Tom Kontos when Auto Remarketing reached him on Friday.
“There’s a lot of uncertainty as to how many cars will actually enter the wholesale channel again as a result of this as well as what corrective measures have to be made to the vehicles before they can be remarketed,” Kontos said.
To recap the situation, Kelley Blue Book again listed the vehicles included in the flap that could force VW to spend as much as $7.3 billion if the automaker must buy back all the units:
2009-2014 VW Jetta Sedan and Jetta SportWagen TDI
2010-2014 Golf TDI
2012-2014 Beetle TDI
2012-2014 VW Passat TDI
2015 Jetta TDI
2015 Golf TDI and SportWagen
2015 Passat TDI
2015 Beetle TDI
“The consumers will not have to elect which option to pursue until the consumer has had the opportunity to fully evaluate the details of each option. There is nothing for the consumer or their counsel to do until they receive the actual formal notice,” U.S. District Judge Charles Breyer said when he presided over Thursday’s proceedings marking the deadline for VW and regulators to arrive at a “concrete” plan.
According to the transcript of the proceeding posted by the court, Breyer commented about how much work remains to rectify the situation involving VW and this emission controversy.
“I think it's worthy of further emphasis, is that the fact that there is confidentiality in the negotiation of the agreements in no way is intended to suggest that the public and interested parties will not have an opportunity to review and comment on any proposed agreement,” the judge said.
“I find it a disservice to have information about where people are in terms of negotiations sort of floated out there, which these consumers believe are probably the terms of any final agreement,” he continued. “It doesn't serve them well. It gives them some concern. It gives them some suggestion that perhaps maybe their particular concerns won't be addressed. And that doesn't further either the settlement process, nor does it further the decision-making processes that they themselves will have to be engaged in, in a determination of whether or not a settlement is appropriate for them.”
Krebs touched on a thought that VW franchised dealerships and managers with these diesel units or perhaps any vehicle from the brand might be thinking.
“The next big question will be do Volkswagen customers think the proposed compensation and repairs are adequate and will potential customers feel confident enough to put Volkswagen on their shopping list,” she said.
In a statement, VW made a pledge to rectify what Krebs mentioned.
“Volkswagen is committed to earning back the trust of its customers, dealers, regulators and the American public. These agreements in principle are an important step on the road to making things right,” the automaker said.
More legal wrangling
During Thursday’s court proceeding, representatives from the Justice Department and the FTC mentioned that their investigations of VW remain ongoing and more developments could be ahead.
Furthermore, state attorneys general also are awaiting their turn to bring charges against VW.
“The agreement in principle reached by certain parties to the Volkswagen litigation in federal court does not in any way resolve the consumer and environmental penalty claims of the states, or the states’ claims for injunctive relief,” New York attorney general Eric Schneiderman said.
“The multistate coalition — led by New York and the states of Connecticut, Massachusetts, Oregon, Tennessee, and Washington — continues to vigorously investigate Volkswagen’s misconduct, and will aggressively pursue the recovery of substantial penalties and other appropriate relief,” Schneiderman continued.
Despite the legal storm still impacting the OEM, Volkswagen lead counsel Robert Giuffra sounded upbeat when he made his statement during Thursday’s court proceeding.
“I’d like to first thank the court and director Mueller for all you’ve done to promote this process,” Giuffra said according to the transcript. “There’s nothing like a deadline to focus persons’ attention. We’re not aware of another (multidistrict litigation) that's moved as quickly as this one. I think we first met in December, and now we're at this point four months later. And I think that reflects that Volkswagen is committed to winning back the trust of its customers, its dealers, its regulators, and all Americans.
“And we think that these agreements are an important step forward on the road to making things right,” he continued. “And, as your honor indicated, these agreements and the settlements that we hope will result will compensate fully all customers and remediate all environmental issues. So we think they’re good for consumers, they’re good for the environment, and they’re good for Volkswagen.”