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Government 'complacency' questioned as dealers face Dieselgate fallout

Volkswagen tower

Members of the transport select committee have branded the Government “phenomenally complacent” over the response to the Volkswagen emissions scandal.

As AM reported on recall delays and some dealers’ concerned about a sales embargo on some unregistered cars committee members grilled the minister of state at the Department for Transport, Robert Goodwill, on the response to the scandal, when he appeared before them on Monday.

Goodill was asked why no move had been made towards a prosecution of the German manufacturer despite DfT testing which last week confirmed that Volkswagen had been the only brand to employ an emissions defeat device.

But he would not comment on whether the measure had been illegal, claiming it was a matter for the courts.

The minister, who denied accusations that the government had been “phenomenally complacent” in their dealings with the Volkswagen scandal, also said that he had not pushed for any move by the Serious Fraud Office.

Committee member and Conservative MP Mark Menzies said: “Do you not think that the government has got a duty to bring a prosecution? Can I make sure you hold VW to account?”

The Labour MP Graham Stringer added: “It seems you are more concerned with protecting the reputation of VW as opposed to punishing them for poisoning the people of this country.

“VW lawyers will be popping very expensive bottles of champagne tonight after this performance, minister.”

Dieselgate recall delays worry dealers

In November, AM reported on Volkswagen franchisees’ concerns about their workload as a result of the emissions scandal, but in the six months since, the recall schedule has slipped even further.

UK dealers are facing delays in fixing the 1.2 million vehicles recalled as a result of the Volkswagen Group emissions scandal, which they fear could see their workshops overrun with years of warranty work that generates little extra profit for their effort.

Six months ago, Volkswagen Group UK managing director Paul Willis said the manufacturer wanted all 508,276 affected

Volkswagens, 393,450 Audis, 131,569 Škodas and 76,773 Seats here recalled and fixed by the end of 2016.

However, fixes to the Volkswagen Passat due to begin this month have been delayed because Volkswagen has yet to gain approval from Germany’s Federal Motor Transport Authority (KBA) for its proposed technical fix. German newspaper Die Welt reported that changes to the Passat’s fuel efficiency had proved a sticking point that may delay the recall until June.

One UK Volkswagen dealer, who asked not to be named, said: “For a delay to the schedule to happen so early on is a concern.

“We have worked on a handful of Amaroks as part of a normal service booking and that has been fine, a two-minute fix, but we don’t know much about the next wave of fixes.”

Volkswagen had said it expected its 2-litre diesel engines to require a software tweak, while 1.6-litre diesels would require the fitment of a ‘flow transformer’ device, meaning 400,000 UK vehicles would require mechanical changes.

AM’s dealer source said: “I can see the recalls happening for two or three years or more and they are all to be completed on a warranty rate. We won’t be making money out of them and there is an additional host of form-filling – dotting of i’s and crossing of t’s – to claim that money from Volkswagen.”

A Volkswagen spokesman said the relevant motor authorities had approved the planned software update for the Audi A4, A5, Q5 and Seat Exeo with the 2.0-litre EA 189 engine.

However, he added: “The software solution for the Passat with the 2.0-litre EA 189 engine needs to be reworked in order to achieve all target requirements.

“The Volkswagen Group and the KBA agree that only solutions that have been 100% confirmed by measurements can be accepted.”

As in November, AM could find few senior franchise operators in the UK willing to speak on the record about the emissions scandal.

“One of the worst things about all this is the lack of a voice that the UK dealership network has had,” said AM’s dealer source.

“People are frightened to stand up and raise genuine concerns and that’s not right.”

The impact on registrations

At the Geneva Motor Show in March, Willis warned that first-quarter registrations for the VW brand would be down, and he was right.

Overall UK registrations for the first three months of the year were down 4.9% on the corresponding period a year earlier, compared with an overall market growth of more than 5%.

Retail registrations were actually up 0.11% in Q1. However, ‘true fleet’ registrations (excluding daily rental and Motability sales) were down 14%.

With 38,694 registrations in March, Volkswagen’s overall performance was flat (up 0.2%) year-on-year for the plate-change month. Its market share has dipped from 9.63% in September, when the scandal broke, to 7.46% in March.

Retail registrations of diesel vehicles have been significantly affected, with year-on-year falls in every month except February since the scandal broke. Other Volkswagen Group brands have fared better. Its premium brand, Audi, recorded a 4.56% year-on-year rise in March – to 30,483 – thanks partly to a 147% increase in sales of its new Q7 and a 35% rise in sales of the A1.

It has experienced a sales dip in only one month (-4.41% in October) since September.

Seat, meanwhile, arrested its dramatic year-on-year decline in February, with a 35.54% rise to 1,594 sales, but shed a further 1.9% of registrations in March, selling 8,677 vehicles.

Škoda’s sales rose 10.32% year-on-year in March – to 12,527 – after a 28.41% rise in February. Its worst month came last October, with a 10.8% dip.

AM’s source expressed concern about a stock of unregistered Škoda Yetis, part of a 513 UK-wide tranche of unregistered vehicles that a Škoda spokesman admitted had been “proactively” withheld from sale until the fix programme is completed for its EA189-engine.

“There no word on how long they might be sat around for,” the source said.

The impact on UK dealers

AM’s dealer source said Volkswagen had acted fast to guarantee its dealers their targets and bonuses until the end of 2015, but had set new targets for 2016, which were in line with the market growth anticipated by other manufacturers.

Given forecasters were predicting a 2.5% to 3% registrations rise in 2016, these targets could prove tough to achieve.

New car sales volumes had not suffered, the source said – with attractive offers and increased trade with existing customers continuing to draw in new car business – but margins and used car sales had declined.

On used car sales, they said: “Customers had to sign a disclaimer to say that they knew there were issues with the car before they handed over their money. Of course that’s going to have an effect.”

Volkswagen will not offer UK customers a compensation package – like the $1,000 vouchers being issued in the US – unless there is a significant change in residual values.

Glass’s Guide head of valuations Rupert Pontin told AM that Volkswagen residual values were currently running 0.6% behind the market average for 2013-15 diesel cars and 0.1% for petrol, at 95.8% and 96.6%. But, he said: “The figures are starting to level out.”

Volkswagen UK has introduced ‘loyalty bonus’ discounts to existing owners, or family members at the same address who buy a new car, which range from £400 to £1,500.

Some dealers are treating the recall as an opportunity.

Michael Hayselden, managing director at Hayselden’s Volkswagen in Barnsley, said: “Business has responded to the offers coming through from Volkswagen and we have been encouraged by the support of our loyal customers and the brand. There are ambitious targets for this year and our sales are strong.

“We’re trying to look at the recalls in a positive light. They will bring the owners of older cars into the dealership that might not have visited otherwise.”

Problems in other markets

Volkswagen is not just facing trouble in the UK. In Germany, its board of directors have accepted a cut to bonus pay, reportedly about 30%, after pressure from unions and investors, and in the US, it faces increasing litigation.

EPA boss Gina McCarthy expressed uncertainty at the start of April about whether the US government and Volkswagen would meet its April 21 court deadline to come up with a fix.

VW has set aside £5.3 billion to carry out vehicles fixes, but a single legal action by the US Justice Department aims to sue the group for up to £32.5bn.

Three American franchise operators joined forces to sue the group earlier this month and the founder and chairman of a 17-franchise dealership group in New Jersey is likely to heap more misery on the brand. Steve Kalafer, a three-time Academy Award-nominated documentary film producer and a VW dealer, is making a documentary about the scandal, entitled Backfire: The Volkswagen Fraud of the Century.

In an interview with Automotive News, Kalafer said: “Unless these issues are dealt with straightforwardly, honestly and with equity, Volkswagen will have destroyed their company.”

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