Repairing a wrecked reputation

Source:Reuters Published: 2015-11-10 18:33:01

Volkswagen moves to placate angry customers, workers

Volkswagen AG's (VW's) US subsidiary has announced that it will give $1,000 in credit to nearly 500,000 owners of VW and Audi models that cannot meet government emissions standards. The announcement followed the German automaker's admission last week that it had again employed deception to skirt environmental regulations, this time by understating the carbon dioxide emissions and fuel consumption of its vehicles in Europe. The company's meager response to the scandals has not only angered government officials and customers, but also its own union, which fears workers will end up paying for the company's mistakes.

A sign outside a Volkswagen dealership in Vienna, Austria Photo: CFP

Volkswagen AG (VW) took new steps on Monday to appease US customers and German union leaders unhappy with the company's response to a sweeping emissions cheating scandal that claimed another high-profile executive.

VW is offering a $1,000 credit, of which half is to be spent at VW and Audi dealerships, to US owners of certain diesel models that do not comply with government emissions standards, VW's US subsidiary said.

The automaker said eligible US owners of nearly 500,000 VW and Audi models equipped with 2.0 liter TDI diesel engines can apply to receive a $500 prepaid Visa card and a $500 dealership card, and three years of free roadside assistance services.

The move was the latest attempt to pacify owners who have been frustrated by how the German automaker plans to fix affected models. The company has warned it could rack up multi-billion-euro costs to remedy the issue and repair the damage to its reputation.

"I guess it's a very small step in the right direction. But far from what I'd like to see in terms of being compensated," said Jeff Slagle, a diesel Golf owner in Wilton, Connecticut.

The scandal erupted in September when VW admitted it had rigged US tests for nitrogen oxide emissions. The crisis deepened last week when it said it had understated the carbon dioxide emissions and fuel consumption of vehicles in Europe.

VW said on Monday it continues to discuss potential remedies with US and Californian emissions regulators, including the possibility that some of the affected cars could be bought back from customers.

In Washington, Democratic Senators Richard Blumenthal and Edward Markey on Monday decried VW's consumer program as "insultingly inadequate" and "a fig leaf attempting to hide the true depths of VW's deception."

The senators said VW "should offer every owner a buyback option" and "should state clearly and unequivocally that every owner has the right to sue."

Late Monday, attorneys general from 47 states and the District of Columbia issued a statement saying the automaker's offer to consumers "in no way diminishes the seriousness of the deceptive practices and environmental harms" being investigated by the states.

Slagle, who bought his vehicle in 2011, said he was surprised there were still no plans for how to fix the cars.

"Even though they're clearly culpable, somehow they're in the driver's seat," he added.

VW has said about 482,000 cars sold in the US since 2009 with four-cylinder diesel engines had software installed that allowed the engines to pass government tests for smog-forming nitrogen oxide emissions, but pollute at levels far above government limits in normal operation.

Customer credit

The automaker posted details of its "goodwill package" at Audi plans to post details of a similar program on Friday.

VW said the customer offer did not cover models equipped with the 3.0 V6 TDI diesel engine, including the Touareg.

The company last week told US and Canadian dealers to stop selling certain of those models from 2014 to 2016 after the US Environmental Protection Agency said that VW had installed illegal devices on some 3.0 V6 diesel models.

To qualify for the credit card offer, VW diesel owners must go to the company website, enter a vehicle identification number and provide mileage and contact information. VW will send the cards by mail. To activate the cards, owners then must take the vehicle to the dealer for verification.

VW said customers "don't have to sign anything" and will not be required to relinquish any legal rights.

Management, labor truce

In Germany, the financial impact of the scandal has exacerbated tensions between VW management and labor leaders over plans to cut spending by about 1 billion euros ($1.08 billion) per year through 2019 at its core VW brand operations.

On Monday, Chief Executive Matthias Mueller issued a joint statement with the top labor representative at the company, saying the union would be involved in a series of talks during the coming 10 days in decisions about the company's future.

"In the current difficult situation we must take joint decisions, which pay heed to the profitability as well as employment," Mueller said in the statement.

VW union chief Bernd Osterloh said on Friday the announcement of cuts by VW brand chief Herbert Diess had broken German rules on co-determination by executives and labor, and demanded immediate talks with company bosses.

Labor leaders are irritated by Diess who four months after taking the helm of the VW brand has also ordered a freeze on managerial promotions in a move that limits the clout of the works council, one source close to VW's supervisory board said on Monday.

"The challenges are huge but the workforce is backing the company as long as we manage to come up with a balanced strategy for investments, savings measures and future projects," Osterloh said.

VW's supervisory board is due to approve spending plans on plants, equipment and technology for coming years at a meeting on November 20.

The 20-member panel, which gives nine seats apiece to workers and shareholder representatives, met at the Wolfsburg headquarters on Monday to discuss the latest findings on the diesel emissions scandal and the manipulation of carbon dioxide emissions data.

Separately, VW said its head of corporate communications, Andreas Lampersbach, quit on Monday, joining a wave of departures as the scandal over its manipulation of emissions tests escalates.


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