WASHINGTON (April 25, 2016) — Volkswagen Group's recovery can now begin, but the brand's 652 U.S. dealers will have to wait a couple of months for their turn.
Last week's preliminary agreement between Volkswagen and U.S. authorities — coming a full seven months after the U.S. Environmental Protection Agency (EPA) announced VW's Clean Air Act violations — provided the first clear indications of how the company will put its diesel emissions crisis to rest and some long-awaited answers for consumers. Buybacks and compensation will be offered to owners of affected 2-liter diesels. Pending government approval, fixes will be available for at least some of the vehicles.
Auto dealers cheered the preliminary deal as a positive first step. But they're eager to learn the full scope of their role in rebuilding trust with VW customers.
VW hasn't said, for example, how buybacks will be handled by dealers or how they'll be paid for. And the agreement doesn't make clear which VW diesels can be fixed or how.
A court-imposed gag order will keep those answers under wraps until June 21, the deadline for VW and U.S. authorities to submit and make public the consent decrees finalizing the settlement plans.
But with nearly a half million diesel vehicles due to pass through their hands — for buybacks, lease returns or fixes — dealers are destined to play a central role in the process.
As some dealers see it, the hundreds of thousands of customers who come through VW showrooms, probably with some cash compensation, represent a huge opportunity for VW's beleaguered retail network, which has been battling months of sagging sales, shortages of sellable inventory and the dark cloud of scandal.
With the right inventory in place, sales could get a much-needed boost. A fast, seamless experience for customers going through buybacks or other remedies would give VW's reputation a lift out of the hole.
“Every single transaction and interaction with the customer we view as an opportunity to save a VW customer from defecting away from our brand,” said Mike Morais, president of the 18-franchise Open Road Auto Group with VW stores in Manhattan and Bridgewater, N.J.
To capitalize on that, dealers need to prepare their sales, service and customer-service operations. And for that, they say, they'll need a better handle on the numbers and the mechanics of the remedy program: How many customers would be in line for buybacks vs. repairs? Where will the repurchased cars go?
Alan Brown, chairman of VW's dealer council and general manager of Lewisville VW near Dallas, said Volkswagen needs to do a precise analysis and keep dealers informed over the next two months so that they are well-equipped and not overwhelmed when the program kicks in.
“We're all eager to learn,” Mr. Brown said, “because the dealer network will need a lot of support from the brand, and I believe the dealer network will get a lot of support on all fronts.”
Among the concerns are returned vehicles crowding dealer lots that are already clogged with vehicles grounded by the diesel stop-sale and multiple recalls, and strained inventories from customers who want to get into another VW.
VW dealers say inventories have been tight for months and stood at around 79,000 units on April 1, a 79-day supply.
“This is going to bring a lot of customers to the showroom, and with the current amount of inventory we see as a dealer body, we don't have enough product,” Mr. Morais said.
There's a longer-term question for many dealers who invested large sums in VW stores on the hopes of riding the brand's diesel-fueled growth strategy: When, if ever, will they be able to resume sales of diesel vehicles? After all, those vehicles accounted for more than a fifth of its U.S. sales before the crisis last year.
For now, there's no answer.
A VW spokeswoman said the resumption of new diesel sales is part of the company's ongoing talks with the EPA. A spokeswoman for the agency declined to comment.
Matt Welch, general manager of Auburn VW near Seattle, said he has more than a dozen customers waiting to buy a new VW diesel once they're approved by the feds.
The buyback and compensation offers were much-needed positive news, he said. But “we need to be able to sell the new ones,” Mr. Welch added, “because they all want one.”
This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.