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Volkswagen decided this week to settle legal suits by a set of stakeholders burned by the company’s diesel scandal – its dealers.
Why settle? Because VW knows that in order to emerge from its damaged reputation, it’s going to need its dealers more than ever to mend fences with customers.
“Our dealers are our partners and we value their ongoing loyalty and passion for the Volkswagen brand,” said Heinrich J. Woebcken, CEO of Volkswagen’s North American division. “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.”
The settlement, the details of which are still being worked out, is valued at $1.2 billion to be spread across 650 U.S. dealers, and will be finalized by the end of September by a judge overseeing the proceedings. The dealers have been seeking compensation for lost sales of diesel vehicles and diminished value of their franchises. The settlement specifically impacts 2.0 liter diesel vehicles that were left unsellable on dealer lots.
The pain may not be over. VW is now in settlement talks to compensate dealers for some 85,000 3.0 liter diesel VW, Porsche and Audi vehicles. VW is the parent company for those brands as well, and supplied diesel technology to the German luxury cars.
Volkswagen must keep dealers as allies. “The dealers are VW’s front line in this matter, so getting them compensated is critical,” said Rebecca Lindland, senior analyst for Kelley Blue Book. “Not only do they represent the company to the owners, they’re also impacted financially since they’re hamstrung on what products they can sell. So this is a very important settlement, and hopefully it will be enough to keep dealers and their employees afloat until this entire matter is resolved.”
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