Mr. Kalafer worries that key employees will quit because of the scandal. He said many employees are worried about job security and are uncomfortable facing angry customers asking whether VW employees knew about the company's deceit.
An East Coast VW dealer who owns two stand-alone stores said nearly half of VW's U.S. dealers are losing money or just breaking even.
“This money will help us break even or show a small profit,” said the dealer, who asked not to be named. “We're going to put it in miscellaneous income and spread it out throughout the company.”
But he added: “This hit in mid-September so we won't be able to tell how much this money will help until we hit the end of October.”
If VW doesn't renew the money then, he said, it will hurt his stores “big time.”
Indeed, October will be a crucial test for VW dealers, says Alan Brown, chairman of VW's national dealer council, who oversees two large VW stores in suburban Dallas. The sales impact of the emissions scandal is still coming into focus, he said, so it's too early to tell whether the financial assistance from VW will offset the lost business.
“I believe there are more steps that the dealer network will need,” Mr. Brown said.
VW seems poised to provide more assistance. Horn told members of a congressional oversight subcommittee last week that the company was reviewing new programs to strengthen its dealers' cash position.
“One thing is very, very clear, and I'm damn sincere about this: The dealer profitability in this country is my first objective,” Mr. Horn told the panel.
Keeping workers happy
Bill Wallace, who counts a VW store in Stuart, Fla., among his 10 dealerships, says that with overall customer traffic down, converting shoppers into sales will be critical.
Mr. Wallace said he plans to use the discretionary funds from VW as a “slush fund” to help him close deals, primarily through more generous trade-in offers.
“We don't think you could stimulate marketing very much in this environment,” Mr. Wallace said. “We're just too small of a fish in this pond to make much of a difference in terms of activity, so what activity does come into the market, it's just crucial that we improve our closing ratio.”
At Lash Volkswagen in White Plains, N.Y., the discretionary funds will be used mainly to close deals with diesel owners who are reluctant to get into new gasoline VW vehicles, said Tom Backer, general manager.
“There are some people who want to get out of a diesel for a gas car, and I know one who does not like the figures at all to get out of his diesel,” Mr. Backer said.
Lash sells about 1,000 new VWs a year, about 10 percent of them diesels. He's not worried about sales staff quitting, but Backer said he will pay some VW funds to salespeople “to keep them happy and prosperous.”
Mr. Kalafer, the New Jersey dealer, said his company likewise will make certain that Flemington VW employees are “working and earning money for their family.”
This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.