Scandal-plagued VW brand ekes out gain

The diesel emissions scandal is expected to impact near-term U.S. sales at a crucial time for the VW brand, as it seeks to regain momentum following two years of falling U.S. volume. Photo credit: REUTERS

WASHINGTON -- Volkswagen of America finished a scandal-ridden month with roughly flat U.S. sales, defying forecasts that a mid-month halt to diesel vehicle sales and a black eye to its brand image would hammer its September results.

The VW brand sold 26,141 vehicles last month, an increase of just 145 units, or 0.56 percent, from a year earlier. Analysts polled by Bloomberg had forecasted a 6.7 percent decline, on average.

“We would like to thank dealers and customers for the support of the Volkswagen brand,” Mark McNabb, COO of VW of America, said in a statement. “Volkswagen will continue to work diligently to regain trust and confidence in our brand.”

VW halted sales of all models powered by 2.0-liter diesel engines on Sept. 19, following the EPA’s announcement that the company admitted installing software designed to fool U.S. emissions tests on some 482,000 diesel vehicles sold since 2008. Meanwhile, the EPA is withholding certification on 2016 diesel models pending evidence that they comply with U.S. emissions standards.

The scandal has engulfed VW’s operations in Germany and the U.S., triggering a broad management shakeup at headquarters in Wolfsburg and a long string of investigations by agencies worldwide. The U.S. Department of Justice has reportedly launched a criminal probe, while a coalition of at least 29 state attorneys general, the EPA, California’s Air Resources Board and authorities in Europe are also investigating. The company likely faces billions of dollars in fines and costs stemming from recall repairs and dozens of class-action lawsuits that have been filed since the scandal broke.

The scandal is expected to impact near-term sales at a crucial time for the VW brand, as it seeks to regain momentum following two years of falling U.S. sales.

The September comparison is against a poor showing in September 2014, when VW sales fell 19 percent as the industry grew 9 percent. Despite the added boost this year from Labor Day sales falling in September rather than August, VW’s September deliveries were off 19 percent from the 32,332 units it sold in August.

Diesel-powered models of the VW Golf, Passat, Jetta and Beetle had been a rare bright spot for the brand this year, accounting for about 20 percent of U.S. deliveries through September. A prolonged freeze on diesel deliveries would damage VW’s chances of holding U.S. sales steady from 2014.

Before the stop-sale order, VW had sold 3,060 diesels in September, down 46 percent from a year earlier, according to a VW spokeswoman. Diesels accounted for 12 percent of VW’s total September volume.

Several dealers said the scandal has hurt business and angered customers, though not severely.

“Traffic has definitely been off, but that being said, it’s not completely dead,” said Chris Curran, president of Curran VW in Stratford, Conn. “We’re still doing business. The last few days have actually been pretty good.”

Anthony Gladney, general manager of Lithia Volkswagen of Des Moines, said sales and showroom traffic remained steady throughout September. He says diesel sales have been supplanted by gas-powered models, and year-over-year sales are up for the store.

“Volkswagen buyers are loyal,” he said.

Mike Schwartz, general manager of Galpin VW near Los Angeles, said that despite some slowdown in traffic following the scandal, sales at his store -- one of VW’s largest in the U.S. by sales -- were on track to be ahead of last year’s a few days before the month’s close.

“It’s about as good as I would have hoped for, all things considered,” Schwartz said.

Still, VW has big trust issues to overcome. Just one in four vehicle owners currently has a favorable opinion of VW, compared with three out of four prior to the scandal, according to a survey released today by consultancy AutoPacific Inc. Some 64 percent of the 500 vehicle owners surveyed said they no longer trust VW in light of the scandal, the survey found.

“How Volkswagen handles this issue is critical,” Dan Hall, vice president at AutoPacific, said in a statement. “Trust is an important issue with consumers, and every brand works hard to maintain that trust.”

Fred Emich, general manager of Emich VW in Denver, said he and staffers are working through angry emails, phone calls and visits from customers. Customer concerns are being directed to VW customer care hotlines and online resources set up in the wake of the crisis, he said. A top concern is how whether whatever fix VW implements will affects performance, fuel economy and the market value of their diesel vehicles.

VW diesel buyers at Luther Westside Volkswagen near Minneapolis generally fall into two factions, said general manager Steve Hendricks: environmentalists and those who like diesel for its “peppiness.” That latter category is worried about losing that pep in a recall.

“I’ve been through recall situations over the last 30-plus years, and this is probably the toughest one,” he said. “But not as many people are upset” as would be with safety-related recalls.

Sales last month were up at his dealership, though traffic has slowed some since the scandal, Hendricks says. The store has had to offer new deals to get people in the door, including more generous trade-in allowances.

“We’ve had to buckle down,” he said.

John Irwin and John Walsworth contributed to this report.

You can reach Ryan Beene at autonews@crain.com

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