US Dealers, Volkswagen Agree on Compensation Deal

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Volkswagen and several dealers that filed suit against the company in April of this year have reportedly reached an “agreement in principle” that would settle the lawsuit. The federal district court judge hearing the case wants to see a final agreement by September 30.

It has been nearly a year since Volkswagen has stopped selling its diesel cars in the United States following the revelation that the company had lied about emissions from its “clean-diesel technology.” Then in late March of this year, dealers called on VW to compensate them for the lost sales.

In April, several dealers filed a lawsuit accusing VW of running a “criminal racketeering enterprise” and claiming that VW violated federal and state laws that are designed to protect dealers. In response, VW in June formed a committee with a group of six dealers to negotiate a compensation deal for them.

A press release Thursday morning from the law firm Hagens Berman Sobol Shapiro, which filed the April lawsuit, confirmed the results of the court hearing:

… VW dealers confirmed they have reached a proposed settlement with Volkswagen that creates a settlement fund and provides additional benefits to all franchise dealers in the United States. Funds under the proposed settlement would be paid out within 18 months. The payout formula is still under refinement and will be fully disclosed in the coming weeks. Any particular franchise dealer’s actual payout under the proposed settlement will depend on the size of the dealership and the size of the market it serves, among other factors.

Under the proposed settlement, Volkswagen also agrees to repurchase unfixable, used diesel vehicles on a dealer’s lot under the identical terms that such cars must be repurchased from consumers and independent dealers. Attorneys for the dealerships and Volkswagen were careful to ensure that dealers did not get any special treatment as compared to consumers for the affected cars on their lots.

According to a report last March at Automotive News, VW had been sending dealers “discretionary” payments of tens of thousands of dollars a month for the past six months. One dealer said:

If an average dealer is getting $20,000 a month in discretionary money, that’s $240,000 per year. If they deem this to be a four-year process, that’s going to be just south of $1 million for that particular dealer.

VW’s stock had already closed on the Xetra exchange when the agreement was announced. Shares closed down 1.8% to €120.40, in a 52-week range of €86.36 to €174.05. Shares also traded down about 1% in U.S. over-the-counter markets.