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Thursday 8 December 2016
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VW Dealers Seek Reparations

VW Dealers Seek Reparations

Volkswagen’s U.S. dealers are seeking reparations from the automaker for financial damages caused by the company’s emissions violations.

Three of VW’s U.S. dealers proposed the reparations during a meeting with senior VW AG executives in Germany last week about the company’s U.S. strategy.

Alan Brown, chairman of VW’s U.S. dealer council and frequent guest on The Car Pro Show, attended the meeting and told Automotive News that it was too early to discuss the size of any settlement so soon after pitching the proposal.

VW executives at the meeting, including VW’s global brand chief, Herbert Diess, and Hinrich Woebcken, the VW brand’s new North America chief, did not commit to any reparations, Brown said.

“I encouraged Volkswagen to think of a strategy for how they’re going to approach the dealer network on franchise damages,” Brown said. “Obviously, that’s the pink elephant in the room.”

The prospect of reparations will be among the pressing topics to be addressed by VW executives during the brand’s April 2 make meeting next week at the National Automobile Dealers Association convention in Las Vegas.

Diess and Woebcken plan to attend the franchise meeting that all automaker have, Brown said. A VW AG spokesman for Diess was unavailable for comment late Monday. Jeannine Ginivan, a VW of America spokeswoman, declined to comment.

VW has about 650 dealers in the U.S. and many have seen their franchise values come under pressure amid falling sales, a freeze on new diesel deliveries that previously accounted for about 20 percent of volume, and other complications.

Some have fared even worse.

Brown said a Chicago-area VW dealer saw a buy-sell transaction worth more than $6 million collapse when the would-be purchaser terminated the deal shortly after the EPA disclosed VW’s violations on Sept. 18.

To limit the scandal’s financial impact on dealers, VW of America has wired dealers “discretionary” payments totaling tens of thousands of dollars per month for the last six months, in addition to other financial programs.

The reparations program could be patterned on the discretionary payments, Brown says.

“If an average dealer is getting $20,000 a month in discretionary money, that’s $240,000 per year. If they deem this to be a four-year process, that’s going to be just south of $1 million for that particular dealer,” Brown said.

During the meeting last week, Diess and other VW executives indicated that VW will stick to a mass-market strategy, prioritizing compact and midsize sedans and crossovers as the core of VW’s U.S. sales volume, Brown said in a weekend letter to dealers.

Brown and other dealers were incensed when VW executives in January suggested that the company may adopt a “near-premium” brand strategy in the U.S., prioritizing lower sales volumes and higher per-vehicle profits.

The VW executives did not commit to a U.S. sales goal this year, Brown said.