Volkswagen Group of America previously made arrangements for restitution with owners of vehicles involved with “Dieselgate.” On Thursday, the automaker released its plans to rectify the situation with its franchised dealerships.
Volkswagen announced it has reached an agreement in principle to resolve the claims of VW-branded franchise dealers in the United States relating to TDI vehicles affected by the diesel matter and other matters asserted concerning the value of the franchise.
The company said it has agreed to make cash payments and provide additional benefits to the dealers to resolve alleged past, current and future claims of losses in franchise value. Volkswagen and the dealers’ counsel will now work to finalize details of the proposed settlement, including how to apportion payments to dealers in the appropriate manner.
OEM officials indicated details of the agreement in principle are still under discussion and are expected to be finalized at the end of September. They pointed out any proposed agreement will become effective only after approval by the court, and the parties have agreed to keep further terms confidential as they work to finalize the agreement.
Under the agreement, Volkswagen added that it will consent to the certification — for settlement purposes only — of a class of VW-branded franchise dealers in the United States as of an agreed-upon date.
“We believe this agreement in principle with Volkswagen dealers is a very important step in our commitment to making things right for all our stakeholders in the United States,” said Hinrich Woebcken, chief executive officer of the North American Region for Volkswagen.
“Our dealers are our partners and we value their ongoing loyalty and passion for the Volkswagen brand,” Woebcken continued. “This agreement, when finalized, will strengthen the foundation for our future together and further emphasize our commitment both to our partners and the U.S. market.”
Early indications are that VW dealers welcomed the OEM’s move.
“Our clients recognized the best solution would be one that not only allows them to recoup lost franchise value and continue to employ thousands of American workers, but one that also charts a strong course for the recovery of the Volkswagen brand in the United States,” said Steve Berman, managing partner of the dealers’ counsel Hagens Berman.
“Now that there is a path forward for dealers, they can continue to work proactively to take great care of their customers, who are also VW customers.” Berman added.
Analyst reaction to VW offer
Kelley Blue Book senior analyst Rebecca Lindland sympathized with VW dealers that have been caught in the conflict between the automaker and federal regulators.
“The dealers are VW's front line in this matter, so getting them compensated is critical,” Lindland said. “Not only do they represent the company to the owners, they're also impacted financially since they're hamstrung on what products they can sell.
“So this is a very important settlement, and hopefully it will be enough to keep dealers and their employees afloat until this entire matter is resolved,” she continued.
Kelley Blue Book analyst Akshay Anand elaborated about what could be another positive step to smoothing over the entire situation.
“Reaching an agreement with dealers is yet another step in fixing the ‘Dieselgate’ mess,” Anand said.
“As time passes, news and buzz about the scandal seems to be waning, which is great for VW,” Anand went on to say. “There is still much more to be done, but over time, it seems Volkswagen may be able to move on and get back to focusing on what truly matters — building cars.”
Matt DeLorenzo, managing editor of Kelley Blue Book’s KBB.com, chimed in about what the agreement means for consumers.
“This really has no direct impact on owners of VW diesels, since it’s a compensation plan for the dealers who have been unable to sell 2015 models on the ground,” DeLorenzo said. “Unless or until there is a fix, the cars that have not been certified by government can’t be sold.”
FTC’s warning about false claims to vehicle owners
And speaking of those potential customers, the Federal Trade Commission and the National Automobile Dealers Association are collaborating on a webinar for dealers “not to make false claims” about the involved units.
The FTC recently asked NADA to provide its members with material that cautions sellers of certain VW and Audi diesel vehicles (including dealers of other brands) not to make false claims regarding the recent proposed consent orders concerning those vehicles that the Volkswagen has entered into with the FTC, other governmental agencies, and owners and lessees of the vehicles.
The FTC spelled out several concerns through a post on its business blog. The regulator indicated other companies have been reaching out to owners with alternate offers, which have included:
—Falsely implying that the offer is part of the pending $10 billion settlement
—Falsely telling owners they have to spend compensation under the settlement on a new VW or Audi
—Using “Act now!” tactics to lock owners into a separate deal before owners have the full picture of what they stand to gain as part of the $10 billion settlement.
“It’s unwise for anyone — including independently owned VW dealers — to make separate offers,” the FTC said. “The ultimate choice is the owner’s, of course. Our advice to them is to investigate their options before making a decision.”
Details of the proposed settlements are available at VWCourtSettlement.com.
In order to enhance dealers’ understanding of both the VW buyback program that is part of the proposed settlement and the one set forth by the FTC, NADA has arranged for the FTC to present information on these topics in an NADA University Online webinar that will take place on Sept. 8 beginning at 1 p.m. EDT.
Dealers and their representatives can go here to register.