VW to compensate U.S. dealers over ‘losses in franchise value’

The embattled carmaker has reached an “agreement in principle” to compensate its 650 U.S. dealers which sued Volkswagen for damages in connection with its emissions-cheating scandal. VW revealed in April that it has set aside $18.2 billion to deal with the scandal. The dealership owner’s suit argued that the company “intentionally defrauded dealers by installing so-called “defeat devices” in its diesel cars, and separately carried out a systematic, illegal pricing and allocation scheme that favored some dealers over others and illegally channeled financing business to VW affiliate, Volkswagen Credit, Inc”. VW and the dealers told U.S. District Judge Charles Breyer they plan to file the details of the agreement by the end of September.

Details of the settlement were still under discussion.

On Thursday, judge Breyer also increased the pressure on VW to find a solution to its 3-liter diesel vehicles, which were not included in the agreement in June. Today’s settlement involves a separate class action.

In June, VW reached an $15 billion settlement deal that requires the company to repurchase any of the roughly 500,000 rigged cars sold in the USA, or give owners a cash payout of $5,000 to $10,000 if they want to have their cars fixed.

So far, drivers of some 475,000 two-liter vehicles, including Jettas, Passats, Beetles, Golfs and Audi A3s dating back to model year 2009, have been given a choice between selling back their cars or waiting for an approved mechanical fix, on top of additional compensation.

Robert Giuffra, an attorney for Volkswagen, said Thursday that the auto maker believes it can make the three-liter vehicles fully compliant with USA emissions standards, which he said isn’t the case with the two-liter models.

But Breyer moved the deadline up to October 24, saying he wanted to give the parties involved a “strong sense of urgency” along with a “sense of reality”. The device or the software helped in deactivating pollution controls on over 11 million diesel cars that have been sold globally for several years.

Breyer set a November 3 hearing for an update on the status of the talks and emphasized the urgency of resolving the issue.

Financial provisions related to legal implications of the scandal caused Volkswagen to record a 2105 net loss, its first in more than 20 years. An agreement in principle is basically a stepping-stone to a proper contract.

The company also faces criminal investigations in the USA and overseas, which could pile on more expenses.