Volkswagen Group compensation schemes fail to gain traction

Volkswagen irks both European and US customers with cashcard offer

Michael Horn, President and CEO of Volkswagen America, reacts to being mobbed by the media at the LA Auto Show last week.

Michael Horn, President and CEO of Volkswagen America, reacts to being mobbed by the media at the LA Auto Show last week.


Americans think Volkswagen Group’s US$1,000 no-strings compensation package for Audi, VW motorists isn’t commensurate with the emissions offence, while European owners of these brands - along with Skoda and Seat cars affected - are starting to wonder why they weren’t offered anything at all.

A Volkswagen spokesman at the Los Angeles auto show confirmed that there had been tense feedback from European owners of affected cars, demanding similar compensation packages.

But, he said, Volkswagen had no intention of offering direct financial compensation to its European owners, largely because of the enormous differences in the volumes involved.

“The cost isn’t nothing, but it’s less than half a million cars in the US and Canada, ” the spokesman said.

“If we were to do the same thing in Europe, at €1,000 a car, that would add another €8.5 billion to the cost.”

The estimate is based on a European equivalent of the package offered to North America of three years of roadside assistance, a US$500 prepaid Visa card that can be spent anywhere and another US$500 prepaid Visa card that can be spent at Volkswagen dealerships.

The compensation package is not contingent on customers giving up other legal recourses to compensation through class-action lawsuits or direct lawsuits.

Admitting Volkswagen had received backlash from both European and American customers, he said the company was instead tailoring a different style of compensation for Europeans.

“The American customers were buying into a niche technology, that was specifically advertised as a ‘clean diesel’, but Europeans bought a mainstream technology,” he justified.

“For the European customers, they will be less inconvenienced because their recall solutions are almost ready and their cars will be repaired faster.

“The solution to the problem for the American cars is at a less advanced stage than it is for the European cars. The only version we don’t have the solution for yet in Europe is the 1.2-litre version.”

Ever-widening scandal

The NOx emissions scandal is still widening more than two months after its cheating became public, undercutting the company’s argument that only a few rogue engineers knew of the manipulations. The US Environmental Protection Agency and the California Air Resources Board said last Friday they are now probing every Volkswagen and Audi model with a 3.0-litre diesel engine from model years 2009 through 2016, adding about 85,000 vehicles to the number that VW admitted in September were rigged to pass emissions tests. 

The probe extends the reach of the scandal from VW’s headquarters in Wolfsburg, Germany, to Audi, the Bavarian luxury-car unit that also builds engines for Porsche.

Volkswagen had initially denied any cheating when first confronted about a smaller number of 3.0-litre Audi-engineered motors earlier this month. On Friday, the carmaker conceded that US regulators considered one feature of the engines to be illegal.

With the latest revelations, “nobody can really say that it simply slipped through,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. “VW has a cultural problem. It’s not just about individuals. It’s about structures that need to change.”

- (Additional reporting: Bloomberg)