Volkswagen agrees $1.2bn dealer compensation plan

Volkswagen has agreed to spend more than $1.2bn (€1.06bn) to compensate its 650 US dealers for their losses from the German car-maker’s diesel emissions scandal, sources have said.

The company and a lawyer for VW dealers announced a tentative settlement at a court hearing in San Francisco, but declined to disclose the amount. 

The settlement, which followed talks that began in May, came as a judge ordered VW to move quickly to decide whether to fix or buy back 85,000 3.0 litre luxury vehicles with polluting engines.

The settlement includes $1.2bn in payments for the reduction in value of VW dealerships and additional payments for vehicles that could not be sold, the sources said. 

VW has also agreed to continue to make certain incentive payments to dealers, they said.

“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, chief executive of VW’s North American region.

The dealer settlement means VW has agreed to spend at least $16.5bn in total in the US to address emissions issues, but by no means is out of the woods. 

Volkswagen still faces billions of dollars in potential civil and potential criminal US fines for violating emissions laws, as well as a potential costly buy-back of vehicles equipped with 3.0 litre diesel engines.

VW has admitted it installed improper software that deactivated pollution controls on more than 11 million diesel vehicles sold worldwide. In June, it agreed to pay up to $15.3bn to buy back up to 475,000 vehicles and address claims by federal regulators and 44 US states.

VW’s US dealers have been barred from selling new diesel vehicles for nearly a year. The agreement in principle must still be approved by the court. 

Under the settlement, Volkswagen agreed to repurchase unfixable, used 2.0 litre diesel vehicles on dealers’ lots under the same terms of a consumer buy-back, said Steve Berman, a Seattle lawyer representing dealers.

The deal would help “heal the wounds between Volkswagen and the dealers”, who, “like consumers, have been financially hurt here”, he said. “They have cars on their lots they can’t sell, their franchise value has gone down and they’ve invested millions in these Volkswagen franchises.”

As a result of the scandal, the VW’s US sales are down 13.6% in 2016 after falling 5% last year. VW had previously agreed to buy back 475,0000 vehicles equipped with 2.0 litre engines at a cost of up to $10.03bn.


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