Volkswagen to Pay Dealers $1.2 Billion over Dirty Diesels

AutoInformed.com - VW Diesel ScandalVolkswagen Group of America says it has reached an “agreement in principle” to settle the claims of 650 VW franchise dealers in the United States relating to TDI vehicles affected by the dirty diesel fraud and other matters about the value of their franchise.

Volkswagen will make cash payments – estimated at $1.2 billion – and provide unnamed “additional benefits” to the dealers to resolve 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.

The plaintiffs filed the initial complaint against Volkswagen on April 6, 2016, in the U.S. District Court for the Northern District of Illinois. The litigation was subsequently transferred to the multi-district proceedings in the U.S. District Court for the Northern District of California.

Details of the agreement are “still under discussion and are expected to be finalized at the end of September.” Any agreement will become effective only after approval by the Court. The parties have agreed to keep further terms confidential as they work to finalize the payouts and perks. Under the agreement, Volkswagen will consent to the certification – for settlement purposes only in lawyer language – of a class of VW-branded franchise dealers in the United States as of an agreed 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,” claimed Hinrich J. Woebcken, CEO of the North American Region, Volkswagen.

Woebcken on an interim basis last March replaced Michael Horn  as president and CEO, who presided over the diesel cheating disaster. Horn became CEO after the abrupt resignation of Jonathan Browning when VW brand sales fell in 2013. Horn knew of the emissions cheating scheme in 2014, according to his testimony at a VW hearing in front of the U.S. House Subcommittee on Oversight and Investigations. Woebcken appears to be the only candidate for the permanent job.

The decade before VW said it would triple sales in the U.S. Suddenly and irrationally this made VW dealer franchises overvalued in the market. The lack of trucks and SUVs in the American market doomed the boasting plan from the start.

Steve Berman, Managing Partner of the dealers’ counsel Hagens Berman, claimed, “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.”

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About Kenneth Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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