U.S. dealer groups want answers from VW on 'alarming and puzzling' Scout announcement

The National Automobile Dealers Association and several state associations are reaching out to Volkswagen Group of America looking for assurances on how the German automaker's new Scout brand will be retailed in the U.S., and making sure any plan doesn't violate state franchise laws, Automotive News has learned.

In announcing creation of the Scout brand on May 11, Herbert Diess, CEO of VW Group, said the automaker's plan was to build a "separate, independent company" to operate the brand, sharing a sketch of a future battery electric SUV and pickup. But Diess made no mention of how the U.S.-made vehicles would be distributed in the market, leaving concerned dealers wondering whether the new brand with products they have long coveted would either sell direct to consumers or be a competing franchise.

In a letter dated Tuesday to Scott Keogh, CEO of VW Group of America, NADA CEO Mike Stanton addressed the lack of information from the Scout announcement and urged Keogh to "quickly and clearly communicate Scout's distribution plan to your dealers who have made significant investments to support VW's business model and transformation to electrification."

Stanton acknowledged that Keogh had "been a consistent and full-throated advocate for the franchise dealer retail model," but warned that "the longer your dealers go without information and answers to their questions, the more that speculation will fill the void."

Stanton offered NADA's help in distributing any answers "to the many state association executives, who are currently getting questions from your dealers." A spokesman for NADA authenticated the letter and declined any further comment.

A number of state dealer associations — which work to protect franchise laws for their members — have either already written to Keogh or were in the process of doing so, according to several VW dealers and association executives from across the country who spoke to Automotive News. The communications are expected to vary in tone, just as state franchise laws vary, but generally demand more information on how Scout vehicles will be retailed and assert that VW and Audi dealers not be left out in the cold.

One example, sent Monday from the North Carolina Automobile Dealers Association, is believed to be broadly representative. In it, NCADA President Robert Glaser wrote:

"Despite repeated assurances throughout the years by Volkswagen that its dealers are 'partners' in advancing and promoting VW products, this announcement produced instant dismay and concern among all VW dealers. Certainly, given the strong history of a supportive and effective VW dealer network, even during the diesel-gate fiasco, the clear expectation would be that current VW dealers would be given the first opportunity to enlist as a Scout dealer. However, the widespread belief is that the underlying reason VW is planning to create a parallel dealer network is VW's intention to reduce the VW dealer count."

Glaser said the Scout announcement was "very alarming and puzzling — to the current dealer network," which had spent years asking for the very products that the Scout announcement included, and with no mention of how they would be sold. Glaser also pledged that his organization "will use every legitimate resource available to enforce its existing franchise laws that prohibit VW and all other factories and distributors from selling vehicles in North Carolina in competition with their franchised dealers." Automotive News left a message with NCADA seeking further comment.

A spokesman for VW Group of America declined to comment on the letters and referred to an earlier statement saying that the company aims to "share more news as it becomes available" about its German parent's plans for Scout.