VW has had a turbulent year. Not only were they accused of having faulty emissions switches, they have had allegations waged against them that it was no “accident”. There has been some indication that the executives running VW not only knew about the faulty switch, but designed it so that it could “trick” emissions machines to pass cars even when they were not up to code. To avoid a lengthy court battle and more bad publicity, VW finally came clean and made a deal with car owners that they would buy back any car that had the faulty switch that could not be fixed.
Although VW promised buyers that they would buy back the cars which could not be fixed, there was still the matter of used cars dealerships Surrey and across The States, who were in possession of cars that they could neither fix nor sell. In another knock against the corporation, VW has finally come to an agreement with US dealerships that they will buy back the cars in their possession, with the same rules and terms that they have proposed to car owners.
652 dealerships joined forces to bring VW to court, intending to force them to offer the same buy back deal that they gave to owners. Not only is the German automaker promising to make payments in cash, but they are also promising to provide special incentives to dealerships who work with them to resolve auto claims.
It is estimated that it will cost VW an additional 1.2 billion dollars to buy their defective automobiles back, or to make other cash resolutions with auto dealerships. That is a hefty price for an automotive maker that’s already on the hook for billions to owners of cars across the US. In total, the disclosed amount that VW will pay out will be somewhere close to 16.5 billion dollars. Some believe that it is a small price to pay to avoid a lengthy class action lawsuit, further tarnishing of their reputation as a company, and to avoid having any of their executives brought up on criminal charges.
Although they’re already settling with car owners, dealerships, and regulators, there is no guarantee that VW’s top executives won’t be brought up on charges. But, if it were to happen, it probably would have by now. The biggest problem in the scenario may not be jail time or the enormous cost of buying back the cars. There are still over 560,000 cars that still have the switch that rigged the emissions test, with no way to fix them. Engineers have not found a way to undo the switch and make the cars legal according to emission standards.
The dealership deal appears to be a no-brainer for VW. Since dealerships, both new and used, are the first line of sales for the automotive giant, they need to make it right. If they don’t, they won’t have any vendors left to sell their cars.
It isn’t just the US that VW has to make amends with. Both North and South Korea, as well as Germany, have suits and legal claims that VW still has to reckon with. Not even close to having an end in sight, VW has many bridges to build back, cars to recall and pay for, and fixing to do. Reaching a 14.7 billion dollar agreement with California regulators and car owners in July was the first step. Fixing or rebutting 440,000 other vehicles, with over six hundred million dollars to pay in over 44 states across the US, the bleed just keeps on bleeding.
Dealerships are even more incensed because they’ve built large facilities in hopes of selling the projected amount of 800,000 vehicles this year, which was the forecast of top VW executives. Thanks to the drop in sales due to the scandal of emissions cheating, dealerships are finding that not only are they failing to meet their sales goals, but they have no way to recoup the cost of building dealerships for the promise of sales that aren’t going to be met. Feeling both cheated and blindsided by what VW did, the dealerships’ suit likely won’t even touch the estimated cost that they have incurred through faulty information and poor sales projections.
One small step at reconciliation may help to soften the blow for US car dealerships, but it won’t be enough to help them recoup all their losses. As for VW, only time will tell if they can weather the storm when the smoke emissions finally clear.