We’ve come to expect the best from Volkswagen

The diesel-driven vehicle has enjoyed a sort of renaissance in recent years, shedding its reputation for being dirty and slow. Volkswagen has lead the charge by creating diesel automobiles that have been sold at a premium price because they “perform” just as well as their gasoline siblings, or so we were led to believe.


The Environmental Protection Agency (EPA), United States Department of Justice (USDOJ), and the California Air Resources Board (CARB) announced their accusations of fraud against Volkswagen Group of America on September 18, 2015, bringing the reign of one of the most popular brand of cars in the U.S. to a screeching halt. These agencies have accussed Volkswagen of knowingly installing what the EPA has dubbed “Defeat Devices” in 482,000 diesel cars in the United States. These devices were meant to dupe U.S. regulators by allowing a vehicle to emit less pollution during emissions testing than during regular day-to-day driving. Investigators determined that affected vehicles emitted up to 40 times the amount of pollution legally permitted by the Clean Air Act and CARB standards.

Volkswagen will be required to effectuate some kind of “fix” in order to ensure the diesel emissions systems are brought into compliance with emissions standards. The solution could involve software updates, hardware changes, or both. VW has told its franchisees that they cannot sell the 4-cylinder diesel version of the cars involved until a solution is available. An inconvenience to say the least, and a profit killer for Volkswagen franchisees, independent dealers and other brand name dealers with Volkswagen inventory.


The vehicles named in the notifications include:

Audi A3 (model years 2010 – 2015)
Audi A6 Quattro (model year 2016)
Audi A7 Quattro (model year 2016)
Audi A8 (model year 2016)
Audi A8L (model year 2016)
Audi Q5 (model year 2016)
Beetle (model years 2012 – 2015)
Beetle Convertible (model years 2012 – 2015)
Golf (model years 2010 – 2015)
Golf SportWagen (model year 2015)
Jetta (model years 2009 – 2015)
Jetta SportWagen (model years 2009 – 2014)
Passat (model years 2012 – 2015)
Porsche Cayenne (model year 2015)
Touareg (model year 2014)

Of course, this list may continue to expand. Additionally, the stigma associated with Volkswagen’s deception will likely bleed into the manufacturer’s gas vehicles, affecting their value as well. It is safe to assume that all Volkswagen vehicles on dealer lots have been devalued.

The Economics 101 of ‘DIESELGATE’

The Economics 101 of DIESELGATE

“Volkswagen will not be able to comply with the EPA order to make the Affected Vehicles comply with emissions standards without substantially degrading their performance and fuel efficiency to a level below that advertised by Volkswagen.” – West Virginia Attorney General Patrick Morrisey

When trust is broken and done so intentionally, the system breaks down. Lives – and livelihoods – are affected, sometimes beyond repair. In this case, there is no group more impacted than a unique class of American small business owners — independent and franchised dealers, Volkswagen and otherwise.

Any dealership carrying Volkswagens will face losses. Some will be greater than others, but losses nonetheless. Loss of invested time and money. Loss of revenue. Loss of customer confidence. Loss of goodwill. Perhaps worst of all, loss of reputation in the local community. Reputations that have been built and nourished over two and three generations of dealer-owners can be destroyed in days.

And while most of the reputational costs will fall on the shoulders of Volkswagen franchisees, the independents and other new car dealers with Volkswagens in stock also lose as those cars will be slow to sell, if they sell at all.

Worse, those non-VW franchisees have also been placed at a significant competitive disadvantage since the cheating began in 2009. Because of Volkswagen’s deceit, competing dealers selling comparable vehicles missed innumerable sales as prospects purchased what they thought were the “better” VW vehicles. Alas, we now know those vehicles were actually quite inferior.

As for the affected Volkswagens themselves, the economic impacts are clear. There is a daily cost for holding inventory on a car lot and vehicles lose their value while sitting for an extended period of time. Profit margins for both new and used cars begin to dramatically decline after the vehicles are on lot for more than 30 days.

There are costs incurred in holding vehicles in inventory. Formulas can be used by dealers to determine the “Days in Stock Break–Even Point” which identifies the number of days a vehicle can remain in inventory before profitability on that vehicle hits “break-even.” Cars that cannot be sold in a certain time period or at a profit are wholesaled at auction or sold to another dealer.

Dealers either pay cash or use debt (a “floor plan” in industry parlance) to finance vehicle inventory. Regardless of which avenue a dealer uses, each day a car sits unsold on a dealer’s lot, there is a daily cost associated with holding that car.

Most dealerships have a low threshold for adversity; liquidity and cash positions are affected very quickly. For example, having $200,000 in cash tied up in ten to twelve recalled vehicles that can’t be sold can cripple a dealership.

Dealers that rely on debt (floor plan) to finance their operations have even less ability to withstand hardship because payments must be made on the balance of the unsold inventory. A dealership should not have any more money tied-up in inventory than is absolutely necessary. This is why dealers sell vehicles to other dealers, even if the sale is at a loss. Doing so eases cash considerations. Excess inventory levels have negative consequences on cash flow and, consequently, on the ability to meet the cash demands of an ongoing business.

Because of Volkswagen’s Stop Sales Orders, dealers were forced to pull popular models from their lots and have not had the opportunity to sell the vehicles to the public, other dealers or auto auction houses. Thus, dealers’ money has been tied up in inventory with no chance of a foreseeable return. If “floor planned,” the dealers will carry interest and other costs associated with holding the cars during the pendency of the recall. If the inventory was financed with cash, dealers are unable to realize a financial return on the cash tied up in the unsold Volkswagen inventory. Automotive auction houses have, likewise, been forced to carry expenses on vehicles subject to the Stop Sale Order. Finally, there is now a stigma associated with all Volkswagen vehicles and their values have dropped. All of these damages have been caused by Volkswagen’s deceptive actions.

These businesses, their employees and retail customers have been, and will continue to be, harmed by Volkswagen’s deceptive acts, and thus deserve compensation for their economic losses.


While Volkswagen franchisees are currently being showered with cash and other assistance from the manufacturer, independents and other new car dealers not flying the VW flag have been left out in the cold. Whether their losses involve devalued Volkswagen inventory that was taken in on trade, or lost sales because of VW’s deception and unfair trade practices, dealers must take action to prevent further losses. DealerCoalition.com was developed to serve as a meeting place for dealers looking to take such action. There is no other group dedicated solely to helping dealers affected by the Volkswagen scandal.

Since news of Volkswagen’s cheating broke on September 18, 2015, nearly 500 lawsuits have been filed against the manufacturer. While the vast majority of attorneys involved in this litigation represent consumers, DealerCoalition.com was developed by law firms dedicated to representing dealers, not consumers. These firms have broad experience with dealer issues as well as multi-district litigation and class action law. This unique combination of skills will serve dealers well, as law firms with consumers as clients will have inevitable conflicts of interest if they attempt to zealously represent dealers. DealerCoalition.com law firms will not be hamstrung by such issues.

Volkswagen must compensate dealers. DealerCoalition.com law firms will file lawsuits against the manufacturer under the Lanham Act, state unfair competition laws, and general common law tort theories. Deceptive and unfair trade practices laws provide strong remedies for dealers victimized by Volkswagen’s deception.

DealerCoalition.com law firms will represent dealers on a contingent basis, meaning that there will be no fees or costs unless we are successful in recovering damages. We do not charge hourly fees and we do not require retainers. All costs will be advanced by the law firms and the dealers will not be required to come out of pocket unless and until we win.


DealerCoalition.com was founded by The Law Office of Thomas L. Young, P.A. The law firm represents new and used car dealers as plaintiffs in various matters, most recently the Volkswagen emissions defeat device and deceptive marketing litigation, as well as the BP Deepwater Horizon oil spill economic loss case. The firm focuses exclusively on representing multinational corporations, small business owners, local governments and individuals that have experienced economic losses associated with environmental disasters, regulatory violations and deceptive and unfair trade practices. The firm has brought together a team of attorneys, financial analysts and certified public accountants whose sole mission is to assist clients in complex, multi-district litigation.

Attorney Tom Young is a member of the National Association of Dealer Counsel, the Fleet Management Association, the Automotive Fleet & Leasing Association and the invitation-only BP Gulf Oil Spill Joint Prosecution Group (BP-JPG). The BP-JPG works closely with the Plaintiff Steering Committee as well as Class Counsel in New Orleans to help manage the BP Deepwater Horizon settlement and related litigation. In 2015 Young was appointed to represent a class of more than 200,000 MDL-2179 claimants in an allocation proceeding involving a $1.2 billion settlement with Deepwater Horizon contractor Halliburton Energy Services and rig owner Transocean. Attorney Young is a licensed member of The Florida Bar as well as The Bar of the Supreme Court of the United States.


The Law Office of Thomas L. Young, P.A., through DealerCoalition.com, has associated with numerous member law firms of the National Association of Dealer Counsel for the sole purpose of representing dealers against Volkswagen. We do not under any circumstances represent consumers against Volkswagen or against dealers. As a result, our clients reap the benefit of that laser focus.

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