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Volkswagen Faces Long Road in Regaining Trust

5 min read

Thousands of dollars and an apology may not be enough for the German automobile maker Volkswagen to win back Brooke Johnson’s trust.

Johnson, of Little Rock, is one of 2,540 Arkansas buyers of VW and Audi automobiles in the years 2009-15 who are eligible for a buyback program after the discovery that Volkswagen AG used “defeat device” technology to avoid emission compliance on its four-cylinder Volkswagen and Audi diesel cars.

The deceit was discovered in 2015 by researchers at West Virginia University who were studying emissions and fuel economy.

“I was disappointed,” Johnson said in an email. “The thought of VW lowering their ethical standards to skew emissions tests seemed unnecessary. The overall outcome has been devastating for their brand image.”

Volkswagen stopped the sale of its vehicles, but 11 million had already been sold worldwide, including approximately 482,000 in the United States. Johnson, the owner of a 2014 VW Jetta that she purchased used from Landers Toyota in Little Rock in 2015, filed a lawsuit Sept. 22, 2015, in Pulaski County Circuit Court against Volkswagen Group of America, the U.S. subsidiary of Volkswagen AG.

Johnson was joined in the suit, filed by Allison Koile of the Sanford Law Firm of Russellville, by Dennis Shipley of Russellville. That lawsuit, the first filed in Arkansas, was later moved to federal court, where another Arkansas lawsuit had subsequently been filed.

Eventually all the lawsuits filed nationally against Volkswagen were combined in a multidistrict litigation in the U.S. District Court for the Northern District of California. In July, a settlement was announced in which Volkswagen agreed to pay approximately $14.7 billion to settle the class-action lawsuit.

VW agreed to pay $2.7 billion to support environmental programs, $2 billion to promote nonpolluting cars and $10 billion to either buy back the affected vehicles or have the car’s emissions system corrected.

“They admitted liability within a matter of moments,” Koile said. “For us to process approximately half a million consumer claims within less than a year from the time that it came out that the vehicles were doing what they were doing, it’s simply unheard of in the legal field. I can’t think of a single other time something like this has settled so quickly.”

Settling the Score

Johnson has decided to sell back her car if the settlement is approved by Judge Charles R. Breyer. The final court hearing is scheduled for Oct. 18 in San Francisco.

“I plan to participate in the buyback program that is stated in the settlement package and purchase an alternate vehicle,” Johnson said. “I believe VW is taking full responsibility for their unethical decisions. As a result of those wrongdoings, I have recently received a settlement offer that I am satisfied with.”

Koile said the settlement was hashed out in conference by a plaintiff steering committee of 20 lawyers selected from the many lawyers who were involved in the case. Josh Sanford, the managing partner and founder of the Sanford Law Firm, was present during group negotiations in San Francisco but was not a member of the 20-person committee.

Koile said it appears that about half of the plaintiffs have agreed to the settlement, and she expects most of the rest to agree soon. Plaintiffs who disagree with the settlement can opt out and pursue individual cases against VW.

“There is a very good chance that most everyone will settle their cases at that time,” Koile said. “It makes the most financial sense. I think they reached an amicable resolution for the case and the clients. Volkswagen has met their burden of rectifying the situation.”

Koile said it’s important to note that attorney fees, which generally take a nice-sized chunk out of any class-action settlement, are not a part of the $14.7 billion agreement. The attorneys agreed to argue for their fees in a separate negotiation.

“It’s important because so oftentimes the attorneys can take away from someone’s settlement,” Koile said.

“We will be arguing those at a different date and time. The important thing now is to get these cars off the road. We are not taking a single dime from those who are settling in this manner.”

Dealers Affected

Car buyers were not the only ones betrayed by VW’s deception: Dennis Jungmeyer, director of the Arkansas Automobile Dealers Association, said VW dealers were innocent victims in the scandal as well.

The dealers had no idea they were selling and marketing deceptive cars, and many dealers nationwide are stuck with a high volume of cars they’re no longer able to sell.

Volkswagen agreed in August to reimburse its 652 dealers who argued that the value of their franchises was hurt by the scandal. Reports put the settlement amount at $1.2 billion. Arkansas VW dealers reached by Arkansas Business referred questions to Volkswagen Group of America, which did not return phone messages.

In a statement released at the time of agreement, the CEO of Volkswagen’s North America region, Hinrich J. Woebcken, said the agreement with dealers was “an important step in our commitment to making things right.” Woebcken said VW’s dealers were its partners and the settlement would “strengthen the foundation for our future together.”

It may not be enough.

Volkswagen is “throwing a bunch of money out there,” Jungmeyer said. “It’s hard for somebody to tell what the damage has done to the product itself, reputation-wise. If the reputation of the product goes down, the value of the dealership goes down. Regardless of what kind of settlement they’re doing right now, it remains to be seen if that makes the dealer whole again.”

Jungmeyer said VW really faces agony when it comes to Europe, where it had a much larger market share and sold many more diesel units. Of VW cars sold in America, roughly a quarter were the affected diesel models.

Arkansas saw 2,540 cars sold during the time of the sale of the defective vehicles, so Jungmeyer doesn’t predict any long-lingering problems for Arkansas dealers. “There wasn’t as much consumer pushback as there probably was in other states,” he said.

That’s not to say there won’t be long-lasting consequences. Brooke Johnson said she bought a VW because of her concern for the environment and wouldn’t forget the carmaker’s deception easily.

“I would consider buying a VW vehicle again in the future but would be very hesitant to do so,” she said.

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