Volkswagen Promises US Dealers Restitution for Tainted Diesels – Wall Street Journal
executives in the U.S. have pledged to unveil restitution within a month for hundreds of American franchise dealers that have been damaged by the car maker’s diesel scandal, according to dealers that met with the company on Friday.
A senior American executive from the German car maker made the pledge at a meeting with more than 150 Volkswagen dealers from the northeast at the Renaissance Hotel in Newark, N.J. that lasted nearly three hours Friday.
The meeting was titled “The TDI Settlement Program,” the first in a series of similar gatherings around the country. Volkswagen is hosting the meetings to inform dealers about how the company plans to implement a historic roughly $15 billion settlement agreed last month with customers and government authorities.
The TDI Settlement Program, explained to dealers at Friday’s meeting, outlined how customers would either sell their cars back to dealers or have them fixed. The dealer program affects the nearly 500,000 tainted diesels on the road today and another 12,000 vehicles that dealers are unable to sell and are storing on their lots, according to documents handed out to dealers at Friday’s meeting.
While dealers listened to Mark McNabb, a senior executive from Volkswagen Group of America, Inc., outline the program, one of them interrupted and turned the discussion to dealers’ demand for compensation, which wasn’t on Volkswagen’s agenda.
Steve Kalafer, a N.J.-based co-owner of a large Volkswagen franchise, voiced frustration that the company still hadn’t committed to any form of compensation for its 650 dealers.
Mr. McNabb told the dealers there was “heavy discussion” at the company and an agreement to provide dealers with “fair restitution,” adding the company would make a decision on the matter within the next month, Mr. Kalafer told The Wall Street Journal in an interview after the meeting.
“McNabb said the company was working toward a fair settlement and restitution for the dealers. He used the word restitution for the dealers for the first time,” Mr. Kalafer said.
Volkswagen declined to comment on specifics of the negotiations with U.S. dealers.
“We maintain a regular dialogue with the Volkswagen National Dealer Advisory Council as we work to make things right,” said Jeannine Ginivan, a Volkswagen spokeswoman in an emailed statement.
Michael DiFeo, a member of the advisory council who operates a dealership in Roselle, N.J., said most of Friday’s discussion focused on how the buyback and fixes for tainted diesels would impact dealers.
He said Mr. McNabb “did bring up a dealer settlement and said that talks with the dealer investment community was going very well. A dealer asked on a time frame which Mark said he hoped would happen within 30 days.”
Volkswagen gave dealers a detailed timeline of the buyback and fix program. According to documents passed out at the meeting and reviewed by the Journal, Volkswagen expects to identify and train by September dealers who would act as the program’s “ambassadors”. The buyback would begin in mid-October and is expected to run through the end of 2018.
Volkswagen provided a timeline for fixing the affected diesels in the U.S., according to the documents distributed at the meeting. A software fix would be available for third-generation diesels in October, followed by a “software/hardware modification” for first-generation diesels in January and a software update for second-generation diesel vehicles in February. In October 2017, Volkswagen expects to have a hardware fix ready for third-generation diesel vehicles.
U.S. environmental authorities haven’t yet approved the fixes for the nearly 500,000 affected diesel vehicles in the U.S.
Customers who opt to sell their vehicles back to Volkswagen would first contact a third-party “settlement specialist”, who, in turn, would handle communications with the dealer, according to the documents distributed by Volkswagen.
If there is an approved fix available for a vehicle that a customer decides to sell back to Volkswagen, the dealer has an option to buy that vehicle for resale. If the dealer declines, the vehicle would be offered to other dealers.
Talks with the Dealer Investment Committee that has been established to negotiate dealers’ grievances with Volkswagen “are ongoing and progressing very well” under the company’s new U.S. management, said Alan Brown, a dealer based in Lewisville, Texas and chairman of the advisory council.
“Personally, I feel more bullish about VW and our future than ever before,” he said.
Unlike the company’s customers, who have forced the company to settle in the courts, the dealers have sought to negotiate with the company on their own, but some dealers have threatened to sue if Volkswagen failed to provide fair compensation.
“Volkswagen’s compensation for consumers is very generous, but it was done with a gun to their head,” Mr. Kalafer said. “We want to know what restitution Volkswagen is going to give to dealers, because we have not put a gun to their head.”
Over the past few years, Volkswagen’s U.S. dealers invested millions of dollars in revamping dealerships. They geared up for the launch of new products tailored to meet the tastes of American consumers in a bid to boost U.S. sales to 800,000 vehicles a year by 2018 and revive sales, which have been falling since 2012.
That plan hit a pothole last September when U.S. authorities disclosed that Volkswagen had rigged diesel engines to cheat on emissions tests. In the following months, Volkswagen U.S. sales tanked and some models weren’t allowed to be sold, leaving dealers stuck with thousands of unsold vehicles.
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