The Other Victims of the Volkswagen Scandal: Dealers

30 Sep 2015 | Author: | No comments yet »

German Prosecutors Backtrack on Winterkorn Role in VW Probe.

The recent Volkswagen scandal has not only angered many of its customers, it is also threatening the prospects of hundreds of dealerships around the country that are anxious to learn how to fix diesel cars that intentionally thwart emissions tests.German prosecutors were forced into a U-turn in their investigation of former Volkswagen AG Chief Executive Officer Martin Winterkorn after they may have been too quick to name the official as the focus of a probe.Volkswagen has revealed that almost 1.2m vehicles in the UK are involved in the diesel emissions scandal that has rocked the carmaker, meaning more than one in 10 diesel cars on the country’s roads are affected. And it is happening at a delicate time for Volkswagen and its 650 dealers in the United States, where sales have slumped in recent years while the domestic car market rebounded.

The Lower Saxony prosecutor’s office issued a fresh statement Tuesday saying they are investigating accusations of fraud at VW, and removed a statement from earlier in the week. For several years, American dealers complained to Volkswagen that it was offering the wrong cars for the domestic market and that its prices were too high compared with its rivals. After the scandal prompted the departure of former CEO Martin Winterkorn and the suspensions of three senior development executives, more people are set to lose their jobs amid pressure to repair the company’s reputation, the people said.

The apparent slip-up shows the pressure German prosecutors are under to get to the bottom of who ultimately ordered the creation of software that allowed some Audi and Volkswagen diesel cars to cheat U.S. emissions testers for years. The admission means that the UK is one of the countries worst affected by the scandal and will increase the pressure on the government to launch a full investigation. Volkswagen faces civil lawsuits and criminal investigations and has stopped selling the affected vehicles in a growing number of countries after it publicly admitted to cheating on diesel emissions almost two weeks ago. The initial probe against Winterkorn came after Volkswagen and others filed complaints calling for a criminal investigation into whether fraudulent measures were taken to sell cars that didn’t meet emissions standards.

It was “too early” to name Winterkorn, said Christoph Schalast, a professor at the Frankfurt School of Finance. “An initial suspicion must be based on facts, and you must begin an investigation before you can establish the facts.” The scandal has rocked Germany, prompting Winterkorn to resign last week, and has wiped more than 25 billion euros from the Wolfsburg, Germany-based company’s market value. Patrick McLoughlin, the transport secretary, said: “The government’s priority is to protect the public and I understand VW are contacting all UK customers affected. It hasn’t specified how many of each type of car are affected, exactly how it will make the repairs or to what extent the fixes may affect the way the vehicles drive. “That lack of clarity coming from them right now, perhaps it’s because they don’t know, is worrying in itself,” said Stuart Pearson, a London-based analyst for Exane BNP Paribas. “By this stage, investors would have wanted to see a clearer breakdown.” Regulators will be informed of a solution in October, Volkswagen said on Tuesday.

I have made clear to the managing director this needs to happen as soon as possible. “The government expects VW to set out quickly the next steps it will take to correct the problem and support owners of these vehicles already purchased in the UK.” The company intends to set up a “self-serve process” that will allow UK motorists to find out if their vehicle is affected. Volkswagen has emphasized that its new cars with motors that meet Euro 6 diesel-emissions standards aren’t affected. “We’ve come up with a solution with a focus on the customer,” Herbert Diess, chief of Volkswagen’s VW mass-market brand, said to reporters in Brussels. “We will rework the software, maybe make minor adjustments to the engine.” The extent of upgrades to the cars, and whether hardware components need to be replaced, will depend on the model variant and engine size, a person familiar with the matter said.

Reports suggest cars with a particular Volkswagen diesel engine – the EA 189 engine – could emit up to 40 times the amount of nitrous oxide readings showed in tests. Some managers have fretted that giving Jones Day full access to documents could result in the lawyers seeing confidential information not linked to the diesel disaster, the person said. Car dealers are also stuck with hundreds of diesel-engine cars on their lots that they can no longer sell until Vokswagen fixes the emission problem. “We are sitting here doing the best we can, and we’re waiting patiently along with the rest of our customers to see what Volkswagen decides to do,” said Lance Willis, the general manager of a Volkswagen dealership in the Woodlands, Tex. Volkswagen says 11 million cars in total could be affected, including Volkswagen cars such as the Golf, Beetle and Passat, and other Volkswagen-owned brands such as Audi that use the same engine. Three days after admitting to its deception, Volkswagen told its dealers that it would provide financial guarantees and extra bonuses to “stabilize your profitability in the near term.” It also stressed in another dealer communication that the problem did not affect the safety of its vehicles and that the company was working hard to find a solution, a message it has since posted on its public social platforms. “We understand the pressure these recent events have put your business under, and we are committed to providing you support,” the letter said, which was signed by Michael Horn, the chief executive of the Volkswagen Group of America.

The company will also pay dealers $300 for any new gasoline-powered car they sell, $600 for Passat models and will guarantee extra bonus compensations for dealers for cars sold in the third and fourth quarter this year. Bozena Michalowska Howells, part of the consumer law and product safety group at Leigh Day, wrote in the letter: “While we welcome the news that repairs will be undertaken to upgrade the affected cars to comply with EU nitrogen dioxide emission standards, such repairs may result in reduced fuel efficiency and increased CO2 emissions which in turn may impact upon the vehicle excise duty payable and other associated costs. All cars must complete a standard emissions test, which, unlike in the US, is independently witnessed by a government-appointed independent agency. “On the separate on-going debate about real world testing, industry accepts that the current test method for cars is out of date and is seeking agreement from the European Commission for a new emissions test that embraces new testing technologies and which is more representative of on-road conditions.” “All affected vehicles are absolutely safe and roadworthy. Porsche’s North America chief, Detlev von Platen, will now head sales at the Stuttgart-based sports-car maker, replacing Bernhard Maier, who is moving to head the mass-market Skoda brand.

Volkswagen’s plan to make Chief Financial Officer Hans Dieter Poetsch supervisory board chairman, decided before the scandal broke, has also come under fire. They warned that the overly ambitious goal of selling 800,000 cars by 2018 would not be met and said the company’s lineup needed cars that were better adapted to the American market. It goes without saying that we will take full responsibility and cover costs for the necessary arrangements and measures. “The software in question does not affect handling, consumption or emissions. Poetsch’s promotion sends “a pretty bad signal to the market, the regulators and everyone who’s bringing litigation now against VW,” Hans-Christoph Hirt, executive director at Hermes Equity Ownership Services, said in an interview with Bloomberg Television.

The Porsche and Piech families, who control more than half of Volkswagen’s voting shares, support Poetsch, according to people familiar with their thinking. U.K. law firm Leigh Day sent a letter to Mueller saying that if the defeat devices were installed on British vehicles, “this undoubtedly amounts to a misrepresentation and a breach of contract.” The rigged emissions-test results were in a type of diesel engine installed in about 5 million VW brand cars, 2.1 million Audi models, 1.8 million VW delivery vans, 1.2 million autos from the Skoda unit and 700,000 from the Spanish Seat nameplate.

It is. chief executive Marton Winterkorn has resigned from his position and Volkswagen shares plummeted when the news broke, amid fears it could face billions of dollars of fines and repayments. Horn was directly implicated in the fraud, his removal as the top American executive “would be nothing short of catastrophic to our market and our relationship.” (The company said last week it would keep Mr. While recalls are common, they generally involve a safety problem that must be addressed, not a ploy to foil regulators. “Volkswagen’s acknowledged misconduct regarding its vehicle emissions has been extremely disappointing, and dealers are deeply concerned about how this breach of trust will affect their customers,” said Jared Allen, a spokesman for the National Automobile Dealers Association.

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