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VW sweetens the deal for unsold U.S. diesels

Keith Laing
Detroit News Washington Bureau

Washington — Volkswagen is offering sweet deals to entice drivers to buy its remaining diesel cars in stock at U.S. dealers after receiving clearance from federal regulators to sell its 2-liter TDI diesels from the 2015 model year.

The beleaguered German automaker is giving drivers a 24-month lease option with an $8,500 bonus, or 0 percent, 72-month financing with a $5,000 bonus, on its Generation 3 2.0L TDI vehicles. Eligible models include TDI version of the 2015 Jetta, Golf, Beetle, Passat and Audi A3, each modified to meet U.S. emission standards after the automaker was caught cheating regulations.

Volkswagen received clearance from the U.S. Environmental Protection Agency and the California Air Resources Board to sell the remaining 2015 TDIs after the U.S. government indicted six present and former VW executives. It also charged the company with three criminal felony counts for what regulators called a “10-year conspiracy” to rig hundreds of thousands of diesel cars to cheat U.S. emission standards.

Under the agreement, Volkswagen had to remove the so-called “defeat device” software that regulators said altered the emission performance of the TDI vehicles and replace it with software that directs the vehicle’s emission controls to function effectively in all normal driving conditions.

Volkswagen says of the changes: “The emissions modification will change the way your car’s engine and emission control systems interact. This will affect technical functions under some operating conditions, for example when the vehicle is started for the day. No significant changes to key vehicle attributes are expected, including fuel consumption, reliability, durability, vehicle performance, drivability, or other driving characteristics.”

The company says 11,000 of the modified diesels are now available for sale, roughly 3,100 of which were sold last month. By contrast, VW reported sales of more than 7,400 diesels the month in August 2015, enough to count for nearly 23 percent of sales in the month before the emission scandal broke.

Mike DiFeo, chairman of Volkswagen’s U.S. Dealer Council and dealer principal at Linden Volkswagen in Linden, New Jersey, says the once-barred cars have now become a hot commodity VW’s U.S. showrooms.

“Volkswagen publicly said they are not bringing diesels back to the U.S.,” he said. “With that being said, there’s still a lot of people that enjoy these vehicles.”

DiFeo’s dealership has 24 TDI vehicles available for sale. Three of them have already been sold, and he has received inquires about many of the others.

“These cars are not going to last,” he said.

Parent Volkswagen AG, Europe’s largest automaker and a cornerstone of corporate Germany, was forced to plead guilty to charges of participating in a conspiracy to defraud the United States and violating the Clean Air Act. It paid $2.8 billion in criminal fines and $1.5 billion in civil penalties related to the fraud.

In addition to the fines, Volkswagen agreed to pay a $14.7 billion settlement between Volkswagen and U.S. regulators to fix or buy back about 475,000 rigged 2-liter diesel vehicles. It also agreed to pay $1.2 billion to fix or buy back approximately 78,000 additional 3-liter diesels that were built to cheat U.S. emission standards. The scheme has cost Volkswagen more than $20 billion in fines and settlements.

Brian Moody, executive editor of Autotrader, said Volkswagen has benefited from a loyal U.S. fanbase that has helped it to weather the storm from federal regulators.

“Volkswagen’s TDI cars have always been popular with a select group of consumers, achieving almost cult-car status in just a few years,” he said. “The combination of great fuel-economy, fun, torque-rich acceleration and that ‘VW certain something’ mean a lot of owners are fiercely loyal to the VW diesel models. The cars are remarkably fun to drive. This group of loyal diesel buyer will likely be the audience for the newly re-available 2015 cars.”

Volkswagen has been under fire with U.S. regulators since the company was accused by the EPA in September 2015 of selling diesels for years with software that activated required air pollution equipment only during emissions tests. They had been marketed as “clean diesels” for the company’s Volkswagen, Audi and Porsche brands between 2008 and 2015.

The German automaker has admitted to programming its diesel cars to trick emissions testers into believing the engines released far less pollution into the air than they actually do, in violation of the federal Clean Air Act. Regulators have said in normal driving, they emitted up to 40 times more smog-causing nitrogen oxide than the legal limit.

DeFio, the VW dealer counsel chairman, said the company has offered a “great deal” to entice buyers to consider buying the modified diesels. One requirement: Volkswagen had to place new window stickers on the once-verboten diesel cars before they could offer them for sale.

Alan Brown, former VW U.S. Dealer Advisory Council president and general manager of Bobby Beck’s McKinney Volkswagen in Texas, said the TDIs have “been in the sales process for about two weeks and the inventory is going quickly.”

“We had 1,500 buybacks scheduled at our stores,” he said. “Eighty to 90 percent of that customer didn’t really want to give up the car. The financial incentives were so good that they gave the car up, but a lot of the feedback we got is that was the best car they ever had.”

The company agreed to compensate owners who purchased 2-liter diesels before September 2015 with payments of $5,100 to $10,000, depending on the age of their cars, as part of its settlement with federal regulators. Some drivers have not been satisfied with Volkswagen’s offered for their polluting diesels.

“This thing has been nothing but a nightmare of trouble,” Michael Soileau, 67, of Atlanta, Texas, who owns a 2014 TDI Volkswagen Passat, told The Detroit News. “The dealers have been jacking me around. They don’t want to give me enough money back to make the deal worthwhile. It’s a $35,000 car, which I’m still making payments on. They want to give me $18,000.”

Soileau would not consider buying another TDI diesel from Volkswagen, no matter how good the incentives: “Oh my God, how could I justify it? It’s the worst situation I’ve ever been in my life as far as owning a car. I mean, it’s horrible. They’ve got me over a barrel because I still owe like $25,000 on the car.... It’s the scammiest thing I’ve seen.”

Moody, the Autotrader editor, predicted there are likely enough Volkswagen fans remaining who do not feel as strongly as Soileau to allow the company to move its remaining 2015 U.S. diesels.

“The VW incentives are not enough to move Toyota Prius or Chevy Volt shoppers into a VW dealership,” he said, “but are enough that VW diesel fans will be back and think twice before looking, or buying, elsewhere.”

Brown, the former Volkswagen dealer council leader, said VW dealers are in better shape now than they were when the emission scandal first began in 2015.

“I think Volkswagen is going to be the franchise to own,” he said. “I’m glad we weathered the storm that we did. I think dealer attitude is at all-time high compared to what it was 24 months ago.”

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Twitter: @Keith_Laing