Tag Archive | "Volkswagen"

Dealer Group Files Class Action Lawsuit Against Volkswagen


CHICAGO — On Wednesday, Ed Napleton, president of the Napleton Auto Group, filed a class action lawsuit against Volkswagen in the U.S. District Court for the Northern District of Illinois on behalf of three of his Volkswagen dealerships. The lawsuit stated that the manufacturer intentionally defrauded dealers by installing “defeat devices” in its diesel cars.

In addition, the lawsuit further claims that Volkswagen separately carried out a systematic, illegal pricing and allocation scheme that favored some dealers over others and illegally channeled financing business to one of its affiliates, Volkswagen Credit Inc., according to Hagens Berman, a consumer-rights law firm.

“What is really discouraging and led me to file this lawsuit is that Volkswagen has wholly failed to respond to dealer concerns in a substantive manner. It has talked for months about multiple plans, but done nothing and left us dealers in the red, and in limbo,” Napleton said.

The suit also accuses Volkswagen of engaging in a criminal racketeering enterprise, violating federal law designed to protect car dealers from unfair practices by vehicle manufacturers, breaching state franchisee protection laws, and breaching its franchise dealer agreements.

The manufacturer’s deception, the suit charged, has resulted in a drop in the value of the Volkswagen brand. The damage the scandal has caused to the brand, as well as the cease of diesel-vehicle sales, has both negatively hurt dealer profits and the value of their franchises, the suit alleges.

“Plaintiffs and the Franchise Dealer Class have invested millions, collectively hundreds of millions of dollars in the Volkswagen brand,” the suit states. “But now the brand value has plummeted, sales of VW diesels have completely halted, and sales of all VW cars have plummeted.”

Additionally, the complaint states that Volkswagen “purposely and fraudulently induced its dealers to continue to invest in their dealership facilities and to otherwise benefit VW.” It also told dealers that it would replace stair-step programs it had abandoned with new programs with equal or greater financial benefit to dealers.

This move, the suit claims, “was calculated to quell poor publicity as well as dealer outrage at VGoA’s (Volkswagen Group of America) conduct and was otherwise calculated to fraudulently induce its dealers and prospective dealers to continue to invest in the Volkswagen brand.”

As a result, according to the complaint, franchised dealers built new showrooms and purchased new facilities and also heavily stocked their lots with CleanDiesel vehicles, based on the manufacturer’s false marketing.

“Franchise owners are now left with lots full of CleanDiesel vehicles they are unable to sell, and these cars have suffered tremendous loss of value and take up inventory space and carrying costs,” Steve Berman, managing partner of Hagens Berman added. “VW dealerships large and small have been at the mercy of an unethical corporation, much like the hundreds of thousands of owners across the country, and we believe it’s time to take a stand for their rights.

“In a sickening display of VW’s disregard for its dealer franchisees, Napleton Automotive of Urbana was purchased after VW admitted its fraud to regulators, just three days before the Dieselgate scandal made headlines. Yet Volkswagen withheld the truth and pushed the sale through, knowing well that Ed Napleton was purchasing a dealership that would almost immediately plummet in value,” Berman said.

According to the suit, Volkswagen’s U.S. affiliate in charge of its dealer network was aware of the emissions-cheating software since as early as 2014 but withheld information from current and prospective dealers. Volkswagen has admitted that during that time, it installed emissions cheating software in more than 550,000 U.S. diesel vehicles.

“For VW dealers  — many of which are small, family-owned franchises  — Dieselgate amounts to a classic ‘pump and dump’ operation, in which VW exploited the CleanDiesel eco-friendly market that it helped create, boosting the price of entry and continuation in the market for VW franchises,” Berman said. “All the while, VW withheld information about the impending Dieselgate fiasco, and left dealers to fend for themselves as the scandal unfolded.”

Napleton and his family have been in the automotive dealership business in the Chicago area for three generations. Today, the Napleton family operates more than 50 dealerships in five states.

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NADA Statement on Departure of VW of America CEO Michael Horn


TYSONS, Va. – This week’s departure of Volkswagen of America’s President and CEO Michael Horn is a significant blow to the VW dealer network, which has been operating in crisis mode for more than six months. What’s most regrettable about Mr. Horn’s departure is that it leaves more questions than answers for the 652 Volkswagen dealers across the U.S.

The impact of the diesel defeat-device scandal has not only negatively impacted dealership profitability due to a limitation of product available to sell, but, more significantly, has severely damaged the reputation of the brand in the eyes of consumers – damage we all know could take many years to overcome.

A critical step in this recovery will be for VW to honor the future product plan that Mr. Horn and VW dealers fought vigorously for in Wolfsburg. Volkswagen’s U.S. dealers have made significant investments in buildings, technology, and people over the past several years based these product commitments that we hope are not in jeopardy.

NADA calls on Volkswagen AG CEO Matthias Mueller, and brand chief Herbert Diess to meet personally with their dealers at the upcoming Volkswagen franchise meeting during the NADA Convention in Las Vegas. VW dealers deserve to hear first-hand from the company about its vision for the future of Volkswagen in the United States.

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VW Credit Teams With Safe-Guard on New Line of F&I Products


HERNDON, Va. — VW Credit Inc. — doing business as Volkswagen Credit, Audi Financial Services and Ducati Financial Services — has announced a new line of Volkswagen, Audi and Ducati branded lines of automobile and motorcycle protection products for the U.S. market.

The captive said this week it reached an agreement with Safe-Guard Products International LLC to bring the branded products to market. Together, the parties will develop, market, and distribute the newly enhanced suite of products, with program introduction to the Volkswagen, Audi, and Ducati dealer networks beginning on Jan. 1, 2017.

“Our decision to take a direct role in underwriting most vehicle protection products, while also enhancing the offering with other products specifically developed for our brands, is part of a multipronged strategy that aims to increase overall customer satisfaction and to build loyalty by which our customers return to the dealer network for any future service needs,” said Richard Howse, vice president of marketing and business development for VCI.

The company said it will offer dealer support for all of its new products, including a dedicated 28-person national sales and training team, a completely branded marketing offering, and new technology, such as a branded mobile claims application.

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Volkswagen Fix Rejected by California Board as Setbacks Grow


Volkswagen AG’s work to overcome the emissions-cheating scandal was set back after the California Air Resources Board rejected its proposed engine fix as “incomplete,” just a day before Chief Executive Officer Matthias Mueller meets regulators to discuss ways out of the crisis.

“Volkswagen made a decision to cheat on emissions tests and then tried to cover it up,” Mary Nichols, chairwoman of the state board, said Tuesday in an e-mailed statement. “They need to make it right”

The rejection closely followed a bumble by Mueller, who in a Sunday interview appeared to dismiss the crisis by saying Europe’s largest automaker “didn’t lie” to regulators about what amounts to a “technical problem.” The timing couldn’t be worse: VW also is in the midst of complex technical talks with the California board counterparts at the U.S. Environmental Protection Agency about possible fixes for about 480,000 diesel cars with 2-liter engines.

On its website, the California board said it “determined that there was no easy and expeditious fix for the affected vehicles.” The EPA seconded the idea on Tuesday, saying it agreed with the state regulator that VW’s plan can’t be approved.

The German automaker reiterated Tuesday that it’s committed to cooperating with regulators in California and elsewhere and said it will present a reworked proposal to the EPA tomorrow at the meeting in Washington. California’s rejection related to initial plans submitted last month, VW said. At that time it asked for an extension to submit additional information and data about the diesel engines and turbocharged-direct injection, or TDI.

“Since then, Volkswagen has had constructive discussions with CARB, including last week when we discussed a framework to remediate the TDI emissions issue,” VW said in an e-mailed statement Tuesday.

CARB said it and the EPA will continue to evaluate VW’s technical proposals.

Mueller’s Flub

CEO Mueller had apologized Sunday in a speech on the eve of the North American International Auto Show in Detroit. “We know we deeply disappointed our customers, the responsible government bodies and the general public here in the U.S.,” Mueller said. “I apologize for what went wrong at Volkswagen.”

That was the same night he made the controversial comments in an interview with National Public Radio appearing to downplay the company’s role in actively deceiving regulators. On Monday morning, the company asked NPR for a do-over, where Mueller blamed a noisy atmosphere for his earlier comments and apologized again.

Mueller is scheduled to meet with EPA chief Gina McCarthy and members of Congress Wednesday morning in Washington. On Monday evening, Mueller had dinner with Republican Senator Bob Corker of Tennessee. VW has a manufacturing plant in Chattanooga, which is undergoing a major expansion. Corker said VW views the meeting with EPA as “very important.”

U.S. Meetings

“They understand fully the order of magnitude of mistakes that have been made and my sense is they are very committed to resolving this in an appropriate way,” Corker said in an interview Tuesday, before ARB announced it had rejected VW’s recall plan.

The CEO’s appearance in Detroit and in the nation’s capital mark his first trip to the U.S. in his new role as CEO. Mueller, the former head of VW’s Porsche sports-car unit, was named CEO in September after Martin Winterkorn was forced out as the “dieselgate” scandal erupted.

Beyond developing an effective fix for each of the three types of non-compliant 4-cylinder engines, VW must document any adverse impacts on vehicles and consumers. And since the emissions scandal centers on Volkswagen’s use of a sophisticated “defeat device” to skirt regulations, any proposed remedy — whether that’s retrofitting cars with new parts or revising software codes — will need to be tested by California technicians before the plan is rolled out to consumers.

Rebecca Lindland, a senior analyst at Kelley Blue Book, said Tuesday that the rejection was not a surprise.

“Volkswagen has been working on an additional potential fix involving the catalytic converter. Those details have not been worked out. The reasons for the rejection involve needing more details and specifications,” she said in a statement.

“Today’s actions do not preclude a recall, but allow for a broader array of potential remedies,” the board said in the statement.

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December Auto Sales Soar 9% in Record Year


Automakers posted a solid 9% sales gain in December, an exclamation point that sealed 2015 as the biggest sales year ever for the industry, reported USA Today.

All told, automakers sold 17.47 million new vehicles for the year, Autodata reported, besting the previous record set in 2000 by 68,138 vehicles. Low gas prices, cheap credit, low unemployment, soaring consumer confidence and warm weather fueled a rush into showrooms in December.

“The U.S. economy continues to expand, and the most important factors that drive demand for new vehicles are in place, so we expect to see a second consecutive year of record industry sales in 2016,” said Mustafa Mohatarem, GM’s chief economist, in a statement.

Still, sales success for individual automakers presented a mixed bag. Detroit’s Big 3 fared well for December and the year. General Motors had a 5.7% sales increase in December, Ford Motor saw an 8.3% boost and Fiat Chrysler sales rose 12.6%, according to Autodata. Tesla Motors doubled sales during the month and sold 23,650 of its luxury electric cars in the U.S. for the year, but came in at the low end of its delivery guidance on worldwide deliveries.

Among Asian makers, Toyota saw a 10.3% increase for the month, Honda was at 9.9% and Nissan at 8.7%. But for the full year, they came in lower, with Toyota posting a 5.3% increase compared to the industry average of 5.7%

One laggard was German automaker Volkswagen Group, which still cannot sell diesel vehicles amid an emissions scandal, down 3.4% overall. The automaker’s Volkswagen brand sales fell 9.1% in December and 4.8% for the year. The company’s Audi luxury brand, which has felt a smaller impact from the scandal, achieved a 6% gain in December and 11.1% for the year. Another loser for the month was Hyundai, saddled with a car-heavy lineup during the SUV surge, down 1.5%.

Consumers continued their exodus from less-lucrative cars into crossovers, sport-utility vehicles and pickups amid low gasoline prices.

At 13.9% market share, the small SUV segment is now the largest category of vehicles in the U.S., trailed by small cars and midsize cars at 13.7% apiece, according to Kelley Blue Book.

“There’s no end in sight to those trends,” AutoTrader.com analyst Michelle Krebs said. “You’re going to hear the same broken record next year.”

Crossovers like the Toyota RAV4, the Nissan Rogue and the Jeep Renegade delivered a robust showing in December.

“The segment is in demand with Baby Boomers and Millennials both looking for increased utility. We think this is a long-term trend,” Ford sales analyst Erich Merkle said on a conference call.

Unlike 2000, when automakers were piling on discounts to sell vehicles despite a strong economy, the industry is financially fit and has spurned steep incentives. Average incentives rose 3.9% in December, compared with a year earlier, to $3,063 per vehicle, according to TrueCar.

Toyota division general manager Bill Fay told reporters it was a “standout year,” though he projects sales to “start to level off a bit” in 2016.

Even as crossovers gain, the industry’s stalwart full-size pickup trucks have also flourished, in addition to new midsize pickups.

The Ford F-Series pickup, the most popular vehicle in the U.S., rose 14.6% to 85,211 units in December. Sales were up 3.5% for the year to 780,354.

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VW Faces Billions in Fines as U.S. Sues for Environmental Violations


The U.S. Justice Department has sued Volkswagen for up to $48 billion for allegedly violating environmental laws – a reminder of the carmaker’s problems nearly four months after its emissions scandal broke.

Although such U.S. lawsuits are typically settled at a fraction of the theoretical maximum penalty, analysts said the size of the claim meant Volkswagen (VW) could face a larger bill than previously anticipated.

“The announcement serves as a reminder/reality check of VW’s still unresolved emissions issues,” Goldman Sachs analysts wrote in a note, maintaining their “sell” recommendation on the stock.

VW shares fell as much as 6 percent to a six-week low on Tuesday, the biggest drop on Germany’s blue-chip DAX index.

The civil lawsuit, announced on Monday, reflects the growing number of allegations against VW since the German company admitted in September to installing devices to cheat emissions tests in several 2.0 liter diesel vehicle models.

According to a Reuters review of the U.S. complaint, VW could in theory face fines of as much as $37,500 per vehicle for each of two violations of the law; up to $3,750 per “defeat device”; and another $37,500 for each day of violation.

The complaint says illegal devices to impair emission control systems were installed in nearly 600,000 vehicles in the United States.

In September, U.S. regulators initially said Europe’s biggest carmaker could face fines in excess of $18 billion.

The lawsuit had been expected, and analysts believe any fine will be far below the theoretical maximum. Although U.S. authorities sued Toyota for up to $58 billion for environmental violations around the turn of the century, they agreed a settlement that cost the Japanese carmaker about $34 million.

“We have not enumerated a maximum possible penalty, and will decline to speculate on what the court may ultimately choose to do,” said U.S. Justice Department spokesman Wyn Hornbuckle.

Equinet analyst Holger Schmidt cut his rating on VW shares to “reduce” from “neutral”.

“We continue to believe that no one is able to make anything else than a wild guess on potential fines,” he said.

During December, VW’s shares had been recovering as the carmaker announced incrementally positive news such as simple fixes for about 8.5 million affected cars in Europe.

The stock fell on Tuesday 22 percent below pre-scandal levels, with analysts particularly concerned about the impact on VW in the United States, where the firm has long struggled to make inroads and tougher regulations mean it faces bigger potential fines.

The lawsuit, filed on behalf of the U.S. Environmental Protection Agency (EPA), accuses VW of four counts of violating the U.S. Clean Air Act, including tampering with the emissions control system and failing to report violations.

“The United States will pursue all appropriate remedies against Volkswagen to redress the violations of our nation’s clean air laws,” said Assistant Attorney General John Cruden, head of the Justice Department’s environment and natural resources division.

The lawsuit is being filed in the Eastern District of Michigan and then transferred to northern California, where class-action lawsuits against VW are pending.

“We’re alleging that they knew what they were doing, they intentionally violated the law and that the consequences were significant to health,” said a senior Justice Department official.

VW’s cheating of diesel emissions tests allowed it to avoid a costly revamp of engines to meet new U.S. standards.

The Justice Department has also been investigating criminal fraud allegations against VW for misleading U.S. consumers and regulators. Criminal charges would require a higher burden of proof than the civil lawsuit.

The U.S. lawsuit also alleges VW gamed emissions controls in many of its 3.0 liter diesel models, including the Audi Q7, and the Porsche Cayenne.

VW’s earlier admissions eliminate almost any possibility that the automaker could defend itself in court, Daniel Riesel of Sive, Paget & Riesel P.C, who defends companies accused of environmental crimes, said.

To win the civil case, the government does not need to prove the degree of intentional deception at VW – just that the cheating occurred, Riesel said. “I don’t think there is any defense in a civil suit,” he said.

Instead, the automaker will seek to negotiate a lower penalty by arguing that the maximum would be “crippling to the company and lead to massive layoffs”, Riesel said.

Even after VW first admitted to using cheat devices in certain models, the automaker “failed to come forward and reveal” that other vehicles contained such devices, the government said.

To cheat the emissions controls, VW installed software that allowed the vehicles to detect when they were being tested on a flatbed. When the vehicles detected they were actually on the road, the software caused the emissions control systems to underperform or shutdown, the government said, allowing the cars to emit dangerous levels of air pollution.

The civil lawsuit does not preclude the Justice Department from pursuing criminal charges against VW, said the Justice Department official.

VW said in a statement: “Volkswagen will continue to work cooperatively with the EPA on developing remedies.”

“We will continue to cooperate with all government agencies investigating these matters.”

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