Volkswagen of America is offering US$500 in cash and $500 in VW dealer credit to owners of its diesel cars, a first step in compensating them in the wake of a global emissions-test cheating scandal.
The "goodwill package" is a stopgap measure while the automaker works on a way to fix the cars, which contain software designed to evade U.S. pollution regulations, the LA Times reported. The automaker said customers don't have to give up their right to sue the company – as thousands already are – but some lawyerss are disputing that and warning customers not to sign an arbitration clause required to get the money.
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"It is a complete end run around the litigation that is in place," Amy Williams-Derry, an attorney with Keller Rohrback, one of the law firms pursuing class action litigation against the automaker, told the LA Times. "They are trying to buy off plaintiffs who have already sued and consumers who would benefit from a class-action recovery."
To get the money, VW customers must visit a website, enter their Vehicle Identification Number, their mileage and contact information. They will also have to take their car to a dealer to activate the gift cards to prove that they own the vehicle. Customers will also get access to a free 24-hour roadside assistance programme for three years.
To be eligible, consumers must be the registered owner or lessee of a Volkswagen diesel with the two-litre TDI engine as of 8 November.
According to the paper, VW said the arbitration clause, buried in clause 11 of its lengthy "Goodwill Package Cardholder Agreements" – is part of the bank terms for the gift cards and is not designed to fool consumers into waiving their legal claims against Volkswagen. But Williams-Derry cautioned "the clause is worded extremely broadly, and the courts have history unfortunately of interpreting these clauses expansively."
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By GlobalDataThe agreement dictates that any arbitration must brought in Sioux Falls, South Dakota, a location "that is an extremely inconvenient" for the vast majority of VW diesel car owners, Williams-Derry told the LA Times.
Volkswagen officials characterised the plan as a way to help out customers while it figures out to bring the cars into compliance with air pollution rule.
"We are working tirelessly to develop an approved remedy for affected vehicles," Michael Horn, president and CEO of Volkswagen Group of America, said. "In the meantime, we are providing this goodwill package as a first step towards regaining our customers' trust."
The package also has a business purpose – by offering credit in addition to the cash, VW ensures that customers will need to make more trips to the dealer, which will reap $500 in revenue and get an opportunity to sell another vehicle.
The report noted the average auction prices of used VW diesel models have dropped nearly $2,100, or 16.1% since the September revelation the automaker had rigged pollution testing, according to car price information company Kelley Blue Book.
Affected owners must register for the package by 30 April.
The offer is an important first step, but the automaker needs to do more, Michelle Krebs, senior analyst at Autotrader, told the LA Times. "It has provided much-needed financial help to dealers who are on the frontlines handling customers and is paying some hefty incentives to buoy sales," she said. "Volkswagen must lay out a plan on how it will fix affected cars."
The company is not expected to offer British customers similar incentives to stay loyal to the brand, saying the situation in the US was "very different" to the UK, the Daily Telegraph reported.
A VW spokesman said the company "has no current plans" for similar incentives for its UK customers.
"The situation is very different in the US," he added: "NOx emissions controls in the US are different to the UK and the likely fix in the US is expected to take longer in terms of the time vehicles are off the road, whereas in the UK it is looking like it will be a software fix."
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