What Do VW Dealers Get From the Diesel-Emission Settlement?
Volkswagen diesel owners aren’t the only ones affected by VW’s ongoing emissions cheating scandal. The company’s dealers have acutely felt the impact of the scandal, in the form of deflating sales figures. The proposed settlement announced last month offers cash payments to owners of 2.0-liter TDI models, who can either sell their cars back to VW or wait to see if modifications to make their cars comply with emissions standards are approved by regulators.
But what do dealers get out of it?
Nothing, actually. None of the billions of dollars set aside to deal with the scandal will go to Volkswagen dealers, according to Automotive News (subscription required). Dealers briefly considered going on the offensive with a class-action lawsuit against VW, but decided to instead negotiate a settlement separately, outside the one proposed for owners of diesel cars.
At the National Automobile Dealers Association (NADA) convention in March, dealers came fairly close to a lawsuit. At the last minute, however, they decided that a court battle would do more harm than good to their long-term prospects. A six-person committee is currently negotiating a deal with VW, while customers remain secure in the knowledge that they have been offered compensation from the carmaker.
Volkswagen executives met with the six-person dealer negotiating committee at the company’s U.S. headquarters in Herndon, Virginia, June 6, but no settlement has been reached so far. Meanwhile, Volkswagen’s 652 U.S. dealers are struggling. The VW brand’s sales were down 15% through June, due to erosion of its public image and the freeze on sales of TDI models, which previously made up roughly one-quarter of the brand’s U.S. volume.
The carmaker has a significant incentive to reach a settlement with its dealers. It needs their cooperation to ensure that any modifications to the non-compliant cars are completed, if and when those modifications are approved by regulators. And it’s entirely possible that buybacks could be conducted through dealers as well, giving them at least an opportunity to replace an older Volkswagen with a brand-new one.
But dealers still don’t have the same leverage they may have had if they had prepared a lawsuit. While that approach would not have guaranteed a favorable outcome, many dealers right now may be looking enviously at the payouts Volkswagen is set to make to consumers. Their own payout, if any, has yet to be determined.