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Dealers hit Volkswagen with class action lawsuits over emissions scandal

Dealerships are losing out because of Volkswagen -- but they aren't going down without a fight.

The emissions scandal has cost Volkswagen dearly both in revenue and reputation -- and now dealerships are the latest groups to take the company to court.

In September, the Volkswagen Group was forced to recall over 400,000 vehicles in the United States after being caught using software which avoided clean air and emissions regulations. Other countries including Germany and South Korea have also ordered the German automaker to recall vehicles which dodge these rules.

Approximately 11 million vehicles worldwide are affected as they are equipped with the "defeat devices" which only reduce emissions to acceptable levels in lab settings rather than when drivers are on the road.

Volkswagen believes the emissions issue will cost the company at least $7.3 billion in damages, but the scandal also means customers are faced with the inconvenience of having their cars recalled for fixes -- and dealers are not making the sales they used to with the previously popular and trusted brand.

On Friday, the Young Law Office revealed that a number of dealerships are joining the queue to take Volkswagen to task over the scandal. While lawsuits have been filed worldwide by customers and governments alike, we shouldn't forget that sellers of Volkswagen vehicles are also facing problems caused by Volkswagen's cheating.

Customers aren't necessarily keen to purchase vehicles from the German automaker, which can now be considered untrustworthy, so dealers are losing out.

"Dealers, not unlike consumers, are stuck with inventory that they cannot sell. And the cars that do sell are often offered at a deep discount from pre-scandal prices," the law office said.

Someone must be held accountable for the financial loss the dealers are facing, and so several independent dealers and non-VW franchises -- including Chevrolet and Saturn -- have filed federal class action complaints against the company.

As of this week, six dealerships have launched their lawsuits against Volkswagen. The companies in question are Saturn, Brown Daub Chevy of Nazareth, A Plus Auto, A to Z Auto Sports, Pye Auto Sales and Warren Manufacturing. The longer dealers have to keep stock they cannot sell, the more tempted others may become to join the class action lawsuit list.

According to Tom Young, the managing partner of the law firm, Volkswagen is costing dealers dearly while their unsellable stock remains on the showroom floor. There is a daily cost in holding car inventories and the longer the car sits there -- especially if after 30 days -- value drops dramatically, resulting in a smaller profit margin or outright loss for dealers.

If vehicles cannot be sold, they are often wholesaled at auction or sold to another dealer -- but it doesn't take many unsold vehicles to cripple a small dealership.

As Volkswagen has placed a stop sale order on the affected models which need to be recalled and fixed, dealers have not been able to sell vehicles to the public, auctions or other dealers -- keeping cash tied up in inventory when revenue is needed to keep businesses afloat.

"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," Young said.

The law firm is representing these dealers in the latest class action lawsuit to be levied against Volkswagen, but also wants to make sure this scandal cannot happen again through a petition for the "Motor Vehicle Safety Whistleblower Act" to be passed in the United States. The act aims to protect and encourage employees to act as an "early warning system" for these kinds of issues before consumers are affected.

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