Saturday, October 29, 2016

The Volkswagen Settlement

Volkswagen finally settled with American customers who bought its so-called "clean diesel" vehicles.  In a deal totaling $14.7 billion, the company will buy back its diesel-powered cars or repair the ones that owners choose to keep.  There's no such repair available, which is likely a moot point because it's not likely that any diesel-VW or diesel-Audi owners will actually want to keep their cars.  
Volkswagen is also paying  $2.7 billion for environmental mitigation and another $2 billion for clean-emissions infrastructure, according to USA Today.
Now Volkswagen's U.S. operations can move on from this scandal without incident.  But move on to what?  Denying its loyal customers the subcompacts and sports cars we've been petitioning the company to sell in America without success?  Pushing a midsize SUV to a mass market that couldn't care less?  Higher maintenance costs?  None of these things suggest a return to grace for VW in the American market.
The monthly sales reports in the U.S., in fact, suggest quite the opposite.  After a hiccup in Europe, VW sales rebounded there, showing that most European buyers shrugged off the cheating on diesel emissions that VW was involved in.  Volkswagen sales in the United States, though, are a different story.  Sales here were down 13 percent in 2016 in the period between January and August from the same period in 2015, August 2015 being the last complete calendar month before the scandal broke.  We Americans tend to be a forgiving bunch - we've forgiven athletes for bad behavior and poor sportsmanship, and we've forgiven politicians for lying about climate change (less so for lying about sex) - but we have a tendency to hold grudges against manufacturers that sell defective big-ticket products like cars.  That's a bridge too far for most of us Yanks. 
Anyway, Volkswagen has to figure out what sort of company it wants to be in the U.S. if it has a chance of getting the diesel scandal behind it.  Does it sell relatively inexpensive cars with a strong German flavor to a small and loyal base of customers that would, as journalist David Kiley once described VW loyalists, buy Volkswagens even if we had to assemble them ourselves in our driveways?  Or does it go mainstream and emphasize watered-down Jettas (sadly, the hybrid version is gone) and overdone sport-utility vehicles?  Does it continue to try to find a balance between satisfying the loyalists and the American mass market?  Is that possible?  Especially given the trust issue?  How is anyone who bought a Volkswagen and is not a die-hard VW loyalist ever going to trust VW again?  And I'm not just talking about only casual customers who bought a diesel-powered VW.  How about people who bought a gasoline-powered VW and are wondering about the integrity of their own cars?
These are questions that Volkswagen is going to have to answer.  If there's a bright side to this, Volkswagen has been in dire straits in America before and has always emerged standing.  Even this scandal hasn't been as bad as the collapse of the brand in the early 1990s, when it couldn't even sell at least 100,000 cars a year.
I'm confident that Volkswagen can find a way to get this scandal behind it.  And its latest new product, the all-wheel-drive Golf Alltrack wagon, is evidence that it's now on the right path.  But I hope that the folks at Volkswagen of America headquarters don't think that one or two new models - or another modern Beetle - are going to solve the problem all by themselves. :-(   

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