The other VW diesel victims: dealers take woes to Wolfsburg


2014 Volkswagen Passat TDI

2014 Volkswagen Passat TDI

Enlarge Photo

In the ongoing Volkswagen diesel scandal, the most obvious victims are the owners of the nearly 600,000 VW, Audi, and Porsche vehicles found to have illegal "defeat device" software.

These owners have been stuck in limbo for the past six months as Volkswagen has struggled to plot a way out of the crisis that will be approved by regulatory agencies.

But so too have the dealers that sold them those cars in the first place.

DON'T MISS: VW values, sales continue to fall as U.S. CEO leaves abruptly

When VW Group of America CEO Michael Horn stepped down earlier this month, dealers viewed that departure as the last straw—and took their concerns directly to Volkswagen headquarters in Wolfsburg, Germany.

When Horn left, dealers felt they had lost their only champion within VW management, Alan Brown, chairman of the Volkswagen National Dealer Advisory Council, explained in a recent interview with Automotive News (subscription required).

Brown and two other members of the council traveled to Wolfsburg, meeting with VW global grand boss Herbert Diess, newly-appointed North America boss Hinrich Woebcken, global sales boss Juergen Stackmann, and North America sales boss Ludger Fretzen.

2014 Volkswagen Passat TDI

2014 Volkswagen Passat TDI

Enlarge Photo

The U.S. delegation hoped to relay their situation to Volkswagen's top-level executives. With the exception of the now-departed Horn, U.S. dealers largely feel top VW management does not take them seriously.

Since the scandal began, Volkswagen sales have dropped, and so have resale values.

And the diesel models that previously made up 25 percent of VW brand sales may well not be certified in time for the 2016 model year.

ALSO SEE: VW diesel scandal now 6 months old; what have we learned?

"Not having that product has affected the dealer network," Brown said.

In California, TDI models previously represented 45 percent of sales at many dealers, he said.

Because they are still unsure when Volkswagen will recall their cars, Brown said many TDI owners are also cutting down on regular maintenance—a major source of income for dealers.

2014 Volkswagen Passat TDI

2014 Volkswagen Passat TDI

Enlarge Photo

Because of both the lost business and damage to the brand, Brown said dealers will seek some form of settlement package from Volkswagen.

He suggested the amount of discretionary funds dealers are given by the company could serve as a metric for determining compensation, but VW hasn't agreed to anything yet.

Volkswagen executives predicted earlier this year that U.S. sales could at best hold steady at 330,000 units.

But Brown thinks the company needs to shoot for 500,000 sales—a number more realistic than the previous and widely derided goal of 800,000 cars in 2018.

MORE: VW diesel emissions scandal: what you need to know in 10 questions (updated)

The less-ambitious goal of 330,000 "does nothing but lose Volkswagen a ton of money" and cut dealer returns on sales, he claims.

VW has had a relatively weak position in the U.S. market in recent years, as it fell behind in responding to trends, from the rise of SUVs to the proliferation or hybrids and battery-electric cars.

The company has tried to expand its U.S. presence in recent years, opening a factory in Chattanooga, Tennessee, and redesigning the Passat mid-size sedan to better suit American tastes.

2015 Volkswagen Passat TDI

2015 Volkswagen Passat TDI

Enlarge Photo

But much of that work may have been damaged by the diesel scandal.

In the short term, Brown believes Volkswagen can boost U.S. sales by cutting Passat prices to attract buyers.

He would also like higher numbers of low-end Beetle models, and for U.S. needs to take precedence when allocating both the new Tiguan crossover and the upcoming Golf Alltrack wagon.

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