Late last week, Volkswagen Group of America finalized an agreement to resolve the claims of VW-branded franchised dealers in the United States relating to vehicles involved in “Dieselgate” and other matters asserted concerning the value of their franchise.
Under the proposed agreement, Volkswagen has agreed to make a maximum total of $1.208 billion in cash payments to eligible dealers and to provide additional benefits to resolve alleged past, current and future claims of losses in franchise value. The parties announced an agreement in principle on Aug. 25.
Auto Remarketing asked two top industry observers to assess the gravity of this move on Monday when Autotrader and Kelley Blue Book hosted its monthly conference call with the media.
“This cash settlement is certainly going to go a long way to keep the franchised dealer body feeling like they’re being heard and taken care of by Volkswagen after all of this emissions fallout,” Kelley Blue Book senior analyst Alec Gutierrez.
“First and foremost what Volkswagen has done right — or as best they can anyways — to keep the franchised dealers happy is to take care of the consumers with the initial package they offered, which included extended warranties and cash payments, let alone the buyout settlement that’s still coming along,” Gutierrez continued.
“I think Volkswagen’s done all they can, given the gravity of the situation. Maintaining a strong relationship with that dealer body is priority No. 1 for sure,” he went on to say.
The proposed agreement was filed this past Friday by the dealers’ counsel with the United States District Court for the Northern District of California. The automaker pointed out the move is subject to the approval of Judge Charles Breyer, who presides over the federal Multi-District Litigation (MDL) proceedings related to the diesel matter.
By its terms, OEM officials emphasized the agreement is not intended to apply to or affect Volkswagen’s obligations under the laws or regulations of any jurisdiction outside the United States, where the legal and factual circumstances relating to TDI vehicles differ.
According to VW’s announcement, the automaker has 652 franchised dealerships in its network.
Perhaps part of the dealers’ concern about their franchise value is softening consumer interest in VW vehicles since the controversy surfaced. The latest KBB.com site data shows VW traffic is down nearly 3.5 percent from last quarter and down nearly 16 percent year-over-year.
The settlement offer might be seen as VW recognizing what dealers are enduring.
“I would just say that there’s no relationship more important to Volkswagen right now than its one with dealers because they are on the front line for taking care of the current buyer base as well as any kind of future base. They need to really work that relationship and support the dealers. There’s just nothing more important for them right now,” Autotrader senior analyst Michelle Krebs said.
“They’re on the verge of unveiling some very important new products like the midsize SUV,” Krebs continued. “If they want to grow back here, they’ve got to do it through their dealers.”