Monday, August 29, 2016

VW to compensate US dealers over emissions mess

VW to compensate US dealers over emissions mess

When you make a mistake, there’s a cost. When you do something you know is wrong on purpose, then get caught, the cost is that much higher. How high? For some, that question is a merely philosophical exercise. But for Volkswagen, the cost is coming down in dollars and cents.
The latest big bill to come is courtesy of American dealerships who purchased vehicles they didn’t know were rigged to pass emissions tests they would have otherwise failed. The cars were rigged to cheat. When VW was caught, they were forced to admit this, leaving nearly 700 American dealerships holding or having sold cars that were not legal to drive. Unfixable, the cars sat idle on the lots, leaving the dealerships with huge debts and no recompense. Until now.

VW agreed to a settlement with the aggrieved dealerships, offering the following noncommittal statement saying the company would offer compensation to “resolve alleged past, current, and future claims of losses in franchise value…”

This is in addition to a previous settlement in which VW agreed to buy back nearly 500,000 “rigged” cars sold in the United States. Another provision offers owners a cash payout to have their cars fixed.

While VW’s latest statement steers wide around any admission of guilt, the company is ponying up the money … but will it be enough to compensate the franchises for their loss of revenue due to PR troubles caused by the chicanery?

That’s the real damage done here. The cars can be replaced quickly and easily, but reputations, once lost, take longer to repair. Rewind a few years when VW was the largest automaker in the world. Cars were selling like hotcakes all over the globe, and the top U.S. dealers wanted to own a VW franchise. Folks were lining up to cash in on the new trend.

Then, without warning, the rug was yanked fully and completely out from under everyone. It was only a few million units, a relatively small number given the total number of units being moved worldwide, but the news hit the consumer market like an A-bomb. People were enraged that the brand they trusted to deliver a high-quality product was cheating to beat emissions regulations. That sentiment pulled VW off its perch at the top of the hill, and sales have continued to look bleak.

The cash might keep the dealerships going, but it will take a strong and continued PR effort to rebuild the trust Americans once placed in the German company.

Ronn Torossian is the Founder and CEO of the New York based public relations firm 5WPR: one of the 20 largest PR Firms in the United States.

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