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Dieselgate Losses Are Hitting Dealerships Too

After Volkswagen was forced by the EPA and third-party testers to admit that it had been cheating on diesel emissions tests for at least five years, they managed to create the biggest auto industry scandal during a year that saw one company after another get into hot water courtesy of some tough new regulations. This naturally hit them in their bottom line, and the overall cost of their mistake is still unknown as both the fines and an EPA-approved fix are still being worked out.

What is known, however, is the effect the scandal is having on VW owners. While the EPA isn’t going after any of the diesel drivers who were duped by Volkswagen’s defeat devices, no one wants to own a car that produces up to 40 times the legal limit of nitrogen oxide emissions. As such, their resale value has dropped like a stone down a dry well, and these owners are beginning to file lawsuits to reclaim this lost value from Volkswagen.

Moving Up The Chain

Private car owners aren’t the only ones being hit hard by this sudden price drop. American dealerships who dared to stock up on VW diesels now own nothing more than expensive iron bricks which are cluttering up their lots and taking up space which the dealership could have used to hold cars which can actually sell.

Although diesel personal vehicles represent a relatively small fraction of the cars on US roads, for the 650 American VW dealerships that fraction was actually as much as 20 percent of the total sales volume – still less than the 50 percent of all European personal vehicles, but certainly enough to do some real damage to the dealerships’ bottom line.

Because of this, and because VW and American regulators have been slow to reach any final decisions, Volkswagen of America has been sending discretionary payments to its licensed dealerships in order to keep them afloat. Still, many dealerships have been calling for a full buyback of the now worthless vehicles, an option which is still under discussion as a possible punishment for the company. Until that point, however, the dealerships are stuck in a kind of limbo, a limbo which is costing them money for every day that passes without a resolution.

Mixed Signals And A Muddled Future

Despite VW’s dishonest ways, the company has been posting consistently growing sales since 2016 began, and the company is still in a position to challenge Toyota for the world’s top automaker.

On the other hand, the shadow cast by Dieselgate shows no sign of lifting as the EPA has rejected Volkswagen’s first proposed fix while CARB, California’s emissions board, has stated that it doesn’t believe that any completely satisfactory fix is even possible. Even in Germany, where this easy fix was accepted, the recall efforts have stalled out thanks to objections left by environmental protection groups.

The federal government is suing VW for a reported $46 billion for its willful violations of EPA regulations, and states are now starting to join in, bringing the company to trial for violating consumer protection laws through false advertising. Throughout the nation, individuals are also filing suits and joining class actions in order to get their money back (along with some extra for all the trouble).

As such, between the steadily increasing sales and the calls for compensation coming in from almost literally every corner, it’s hard to say what the future holds in store for Germany’s biggest car manufacturer. Things are bound to get worse before they get better once the lawsuits either get settled or else get dragged out onto open court, but if VW can clean up its act and return to the sort of sales margins that let it challenge Toyota, then it just might weather the storm.

Attorney David Goldman has a strong belief that everyone should be treated fairly and those with the means should do what they can to bring justice in all areas of our society. That belief has led him to help Florida's injured from being taken advantage of by corporations and insurance companies. Since 1989 David Goldman has been fighting for the rights of Floridians both as an attorney and by personally supporting our community.

Dieselgate Losses Are Hitting Dealerships Too

Goldman Babboni Fernandez
Murphy & Walsh

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