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VW and its U.S. dealers reach proposed settlement over ‘Dieselgate’ scandal

Volkswagen has reached an agreement with its dealers in the United States over grievances related to the “Dieselgate” scandal. In a statement, the carmaker said it would compensate dealers with cash payments and “additional benefits.”

The carmaker is currently working with its dealers’ counsel to finalize details of the proposed settlement, including how to apportion payments to affected dealers. Volkswagen said it expects those details to be finalized by the end of September, but the settlement will still have to be approved by a U.S. District Court judge before it can be implemented. Both VW and the dealers will keep further details confidential until they agree on a final settlement.

Dealers were left out of the proposed settlement covering 2.0-liter four-cylinder diesel cars with illegal “defeat device” software that was announced in June. That settlement includes provisions for buybacks ans modifications of cars to meet emissions standards, and requires Volkswagen to put aside money for pollution mitigation and the promotion of cleaner energy sources. Yet none of the billions of dollars committed to that settlement were meant for dealers.

Those dealers have felt the impact of the scandal. Diesel cars previously made up a significant portion of Volkswagen’s U.S. sales, but those models were pulled from showrooms when the Environmental Protection Agency revealed the carmaker’s use of illegal software to cheat on emissions tests last September. Dealers have also argued that damage to Volkswagen’s reputation has affected their business.

Over the past few months, dealers have gone back and forth over whether to sue VW or settle out of court. Members of the dealers’ council met with company executives at VW headquarters in Wolfsburg, Germany, in March to air their grievances, and filed a complaint against the company on April 6 in the U.S. District Court for the Northern District of Illinois. The litigation was subsequently transferred to the District Court for the Northern District of California, the same court handling the customer settlement.

That settlement needs to receive final approval at an October 18 hearing before it can be implemented. Judge Charles Breyer also ordered Volkswagen and regulators to start settlement talks for a separate group of cars equipped with 3.0-liter V6 engines. The parties have until November 3 to make some progress on that front.

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