VW reaches accord with US dealers to cover losses from diesel-cheating scheme
San Francisco
VOLKSWAGEN AG has agreed to pay 652 car dealerships for their losses from the diesel-cheating scheme that has affected more than half a million cars in the US.
The carmaker will buy back unfixable used vehicles under the same terms as a buyback plan for consumers and independent dealers, lawyers for the dealerships said in a statement without disclosing the dollar value of the tentative settlement. Volkswagen said in a separate statement that it agreed to make cash payments and provide additional benefits to the dealers to resolve their claims.
Almost a year after VW's rigging of diesel-powered vehicles to cheat emissions tests was made public, it still does not have an approved fix for any of the 562,000 cars still polluting US roads.
VW reached a US$14.7 billion agreement with car owners and US and California regulators that calls for buying back or fixing 480,000 Volkswagens with two-litre engines. The company is also on the hook for US$603 million that it agreed to pay 44 states, and it faces more state government claims and investor class actions in the US, lawsuits in Germany and South Korea, and possible criminal penalties in all three countries.
US District Judge Charles Breyer, who last month gave preliminary approval to the carmaker's settlement covering the two-litre models, pressed on Thursday for a solution for vehicles with three-litre engines. Those models include the Volkswagen Touareg, Porsche Cayenne and Audi Q5.
Weeks after Volkswagen admitted to rigging the smaller diesel engines, US regulators alleged that the threelitre engines also contained a so-called defeat device. VW, which initially rejected the allegations, submitted a recall plan for them in February.
Judge Breyer ordered the company to file a plan for fixing the three-litre engines and proof that it works to US regulators by Oct 24 and report back to him on Nov 3.
Lawyers for the dealerships said that they expect to submit a proposed agreement in a few weeks for the judge's approval.
"These 652 mostly small business owners were blindsided by the diesel emissions scandal and have seen the value of their businesses plummet," lawyer Steve Berman said in a statement.
Car dealers and resellers sued VW in class actions alleging fraud and false advertising. Volkswagen was also sued by a few franchise dealerships this year who accused the carmaker of fraud for installing the pollution-control cheating devices in diesel vehicles and sticking them with continuing losses by failing to fix the problem for months.
Dealers are angry because they invested heavily in new, large stores in hopes of seeing the brand sell 800,000 vehicles a year, the goal set by former Volkswagen chief executive officer Martin Winterkorn. Volkswagen's namesake brand sold 349,440 cars and light trucks in the US last year.
VW brand's sales fell almost 14 per cent this year through July while industrywide deliveries rose 1.3 per cent, according to researcher Autodata Corp. VW's share of the market dropped to 1.7 per cent from 2.1 per cent a year earlier, Autodata said.
Since the US Environmental Protection Agency has yet to approve any of VW's proposed remedies for the cars, it could be years before any of the vehicles are taken off US roads, a possibility that may increase fines and penalties against VW. The company has earmarked 18 billion euros (S$27.5 billion) to cover the costs of the scandal. Bloomberg
