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Volkswagen Dealers Reach Settlement Over Cars and Reputations

volkswagen reaches settlement with dealers over emissions scandalContrary to common belief, car dealers are generally not affiliated with the manufacturers of the vehicles they sell. Cars sitting on a dealer’s lot were purchased by that dealer to be re-sold to the public. It is essentially a retail relationship except the items are large, heavy, complicated, and cost tens of thousands of dollars.

So what happens when a dealer buys a parking lot full of Volkswagens, only to learn that VW was knowingly executing one of the biggest environmental cover-ups in history?

That question was largely answered this fall when Volkswagen released a settlement opportunity for its U.S. dealers. $1.2 billion was set aside for dealers who suffered losses; presumably to their bottom lines as well as their overall reputations. Dealers aren’t required to take the deal, however, and those that opt out can choose to pursue their own action against the manufacturer.

This comes shortly after VW reached another separate agreement with its end customers. Volkswagen drivers now have the option of making the company repair their car or buy it back if they want to sever ties and walk away. The repair or buyback also comes with an additional $5,100 to $10,000 per vehicle payable to the owner.

Over 300,000 of those owners have already registered for the deal.

Close to half a million U.S. VWs are covered by the $10 billion fund, and Volkswagen appears to be pleased with the results thus far. About 3,000 people have formally opted out of the arrangement, leaving the door open to pursuing their own action against the company.

The prospect of customers selling back their cars and walking away from the brand is a particularly painful point for a manufacturer that once prided itself on the loyalty shown to it by its customers. Jeep, Subaru, and Volkswagen drivers are known for being fiercely loyal to the brands they support. Perceived as ‘fans’ more than simply customers, these drivers can become almost evangelical when discussing their love for their vehicles.

When combined with the knowledge that diesel-powered Volkswagen owners were led to believe that they were actually helping the environment, the company is learning that fraud will shake even the strongest loyalties. As executives watch billions of dollars in market value evaporate and billions more get paid out to dealers and customers, they are seeing exactly what can happen when those loyalties are misplaced.