Volkswagen is offering $500 in cash and $500 in VW dealer credit to owners of some of its diesel cars.
The "goodwill package" is a stopgap measure while the automaker works on a way to fix the cars, which contain software designed to evade U.S. pollution regulations.
The automaker says customers don't have to give up their right to sue the company -- as thousands already are -- but some attorneys are disputing that and warning customers not to sign an arbitration clause required to get the money.
"It is a complete end run around the litigation that is in place," said Amy Williams-Derry, an attorney with Keller Rohrback, one of the law firm's pursuing class-action litigation against the automaker. "They are trying to buy off plaintiffs who have already sued and consumers who would benefit from a class-action recovery."
Some of the hundreds of cases already filed seek to have VW buy back the vehicles for the full price the customers originally paid.
To get the money, VW customers must visit www.vwdieselinfo.com, enter their Vehicle Identification Number, their mileage and contact information. They will also have to take their car to a dealer to activate the gift cards to prove that they own the vehicle.
Customers will also get access to a free 24-hour roadside assistance program for three years.
Affected owners must register for the package by April 30.
To be eligible, consumers must be the registered owner or lessee of a Volkswagen diesel with the 2-liter TDI engine as of Sunday.
The company sold about 482,000 of the vehicles with the cheating software in the U.S. and up to 11 million worldwide. The diesels emit as much as 40 times the legal limit of nitrogen oxide in normal driving; the software hides those emissions when it detects test conditions.
VW faces a criminal investigation in the U.S. and potential federal Clean Air Act violation fines of up to $18 billion.
VW said the arbitration clause -- buried in clause 11 of its lengthy "Goodwill Package Cardholder Agreements" -- is part of the bank terms for the gift cards and is not designed to fool consumers into waiving their legal claims against Volkswagen.
But Williams-Derry cautioned that "the clause is worded extremely broadly, and the courts have history unfortunately of interpreting these clauses expansively."
The agreement dictates that any arbitration must be brought in Sioux Falls, S.D., a location "that is an extremely inconvenient" for most VW diesel car owners, Williams-Derry said.
Volkswagen officials characterized the plan as a way to help out customers while it figures out ways to bring the cars into compliance with air pollution rules.
"We are working tirelessly to develop an approved remedy for affected vehicles," said Michael Horn, president and chief executive officer of Volkswagen Group of America. "In the meantime, we are providing this Goodwill Package as a first step towards regaining our customers' trust."
The package also has a business purpose -- by offering credit in addition to the cash, VW ensures that customers will need to make more trips to the dealer, which will reap $500 in revenue and get an opportunity to sell another vehicle.
U.S. Sens. Richard Blumenthal, D-Conn., and Edward J. Markey, D-Mass., blasted the package.
"This offer is an insultingly inadequate amount -- a fig leaf attempting to hide the true depths of Volkswagen's deception," they said in a statement. "The company should state clearly and unequivocally that every owner has the right to sue. It should offer every owner who wants to keep her car full compensation for the loss of resale value, fuel economy, and other damage caused by its purposeful deception."
The offer is an important first step, but the automaker needs to do more, said Michelle Krebs, senior analyst at Autotrader.
"It has provided much-needed financial help to dealers who are on the frontlines handling customers and is paying some hefty incentives to buoy sales," she said in a statement. "Volkswagen must lay out a plan on how it will fix affected cars."
Business on 11/10/2015