Volkswagen Group of America has come to an “agreement in principle” with its dealer body about reimbursing them over the diesel emissions scandal. Though the exact terms haven’t been announced, Volkswagen says it has agreed to “make cash payments” and give other benefits to dealers whose franchise values have been hurt by the scandal.
A group of Volkswagen dealers first filed suit against the automaker in April, and in July dealers told reporters that a senior executive had promised “fair restitution” for any lost sales or revenue. VW dealers were unable to sell certain TDI diesel models because they had an illegal “cheat” device intended to evade EPA emissions testing; negative publicity around the scandal may have also discouraged shoppers from buying other types of Volkswagen cars.
The agreement is still being finalized and exact details, if approved by the U.S. District Court for the Northern District of California, are expected be announced in September. VW says it is still determining, for instance, “how to apportion payments to dealers in the appropriate manner.”
“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,” Hinrich J. Woebckn, chairmain of Volkswagen Group of America, said in a statement.
For owners of affected models with 2.0-liter turbodiesel engines, Volkswagen has already announced a plan to buy back cars and reimburse owners. Buying back the cars alone is expected to cost more than $10 billion, with a total of 475,000 Volkswagen and Audi models in the U.S. subject to the deal because their 2.0-liter TDI engines produce illegal amounts of nitrogen oxide (NOx) pollutants.
Gallery: VW reaches “agreement in principle” to compensate U.S. dealers
Volkswagen Group of America, Inc. (“Volkswagen”) today announced it has reached an agreement in principle to resolve the claims of VW-branded franchise dealers in the United States relating to TDI vehicles affected by the diesel matter and other matters asserted concerning the value of the franchise. Volkswagen has agreed to make cash payments and provide additional benefits to the dealers to resolve alleged 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 in the appropriate manner.
Details of the agreement in principle are still under discussion and are expected to be finalized at the end of September. Any proposed agreement will become effective only after approval by the Court, and the parties have agreed to keep further terms confidential as they work to finalize the agreement. Under the agreement, Volkswagen will consent to the certification – for settlement purposes only – 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,” said Hinrich J. Woebcken, CEO of the North American Region, Volkswagen. “Our dealers are our partners and we value their ongoing loyalty and passion for the Volkswagen brand. This agreement, when finalized, will strengthen the foundation for our future together and further emphasize our commitment both to our partners and the U.S. market.”
Steve Berman, Managing Partner of the dealers’ counsel Hagens Berman, said, “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.” Berman added, “Now that there is a path forward for dealers, they can continue to work proactively to take great care of their customers, who are also VW customers.”
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 multidistrict proceedings in the U.S. District Court for the Northern District of California.