Volkswagen Dieselgate update: Dealers confront VW execs, FTC sues, sales hit the skids

April 4, 2016

The Volkswagen Dieselgate scandal began making headlines over six months ago, so you might think that the worst of it would be over by now.

You would be wrong.

In recent days, VW's U.S. dealers and its German executives have met at the National Automobile Dealers Association convention in Las Vegas; the Federal Trade Commission has filed a lawsuit against Volkswagen, submitting several well-known commercials as evidence against the automaker; and VW announced American sales stats for March, which were...not so great.

1. American dealers and German execs grumble on The Strip: For several months, VW's U.S. dealers have complained about the long silences issuing from the brand's German headquarters. They've been upset by executives' lack of clarity about the repair timeline for affected diesels; by VW's Euro-focused lineup, which is far too heavy on cars for crossover-loving Americans; and by VW's cagey lack of commitment to the U.S. market, among other things.

In response, a group of VW dealers traveled to Germany to discuss its concerns. Unfortunately, that tete-a-tete generated little in the way of direct results -- though at least the dealers persuaded global brand head Herbert Diess to attend the NADA meet-up, which he wasn't planning to do.

U.S. dealers have also begun mobilizing their colleagues to create a unified front during further talks with VW in Las Vegas. Dealers have selected five of their own to lead negotiations with VW in hopes of reaching some sort of settlement with the brand, which could include dealer compensation. The negotiations don't eliminate the possibility that dealers might sue VW on their own, but it lessens the likelihood a bit.

As for Diess' appearance at NADA, it did little to provide dealers with specifics about how VW planned to rebuild its image with American consumers. Nor did it provide any details about a potential fix for VW vehicles. Diess did say that dealers would receive larger quantities of VW crossovers like the Tiguan, but many folks walked away from his speech with the feeling that he and others at VW HQ still don't understand the severity of the crisis in the U.S. (That might be because demand for diesels remains strong in the executives' front yard.)

2. FTC sues Volkswagen for deceptive advertising: Last week, the FTC filed a lawsuit against Volkswagen in a U.S. District Court in San Francisco. The suit alleges that Volkswagen intentionally misled consumers about the eco-friendly credentials of roughly 567,000 diesel vehicles sold in America between 2008 and 2015. (Of that number, roughly 482,000 were 2.0-liter Audi and VW models, with the remaining 85,000 being 3.0-liter cars from Audi, Porsche, and VW.) 

For years, Volkswagen insisted that its "clean diesel" vehicles met or exceeded U.S. emissions standards. After the scandal came to light, though, Volkswagen admitted that all TDI models sold since the 2009 model year have been equipped with defeat devices that allow the cars to cheat on emissions tests. When not being tested, those vehicles can emit up to 40 times the legal limit of pollutants.

As with any case that involves deceiving consumers, ads are a big part of the FTC's evidence. You'll see one of those ads above, with a few others at AdAge.com.

3. VW sales continue to sink, though Audi seems unaffected: VW sales numbers have fallen for a fifth straight month. In March, the brand sold just 26,914 vehicles in the U.S., 10.4 percent fewer than in March 2014. So far, VW sales are off 12.5 percent for the year. Market share is down, too: at the end of March 2014, VW controlled 2.0 percent of the U.S. market, but as of last week, it owned just 1.7 percent.

But while Volkswagen's eponymous mass-market brand is taking a beating, Audi continues to improve. The brand sold 18,392 vehicles in the U.S. last month, a 7.5 percent increase over March 2014. To date, Audi is up 4.6 percent for the year. 

4. Porsche lays groundwork for diesel fix: The California Air Resources Board and the Environmental Protection Agency may have given Volkswagen a big ol' thumbs-down on its plans to fix larger, 3.0-liter diesels from Audi, Porsche, and VW, but at least one of those brands assumes that some kind of plan will eventually be approved. Porsche wants dealers to enlarge their loaner fleets so that consumers who bring their diesels in for repairs will be able to drive off in another Porsche vehicle. (Putting owners in loaner models from other brands tends to diminish customer satisfaction.)

To encourage dealers to do so, Porsche has promised to reimburse them for all work done on loaner vehicles, including non-warranty repairs. The company has also said that vehicles that rotate out of dealers' loaner fleets can now be leased via Porsche Financial Services.

Note: For purposes of clarity, "Volkswagen" has been used to refer to the Volkswagen Group parent company, while "VW" has been used to refer to the company's popular mass-market brand of automobiles.

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