Volkswagen moves to appease angry customers, workers

Financial impact of scandal has exacerbating tensions between VW management, labour leaders

DETROIT/BERLIN (Reuters) — Volkswagen AG took new steps on Monday to appease U.S. customers and German union leaders unhappy with the company's response to a sweeping emissions cheating scandal that claimed another high-profile executive.

Volkswagen is offering a US$1,000 credit, of which half is to be spent at VW and Audi dealerships, to U.S. owners of certain diesel models that do not comply with government emissions standards, VW's U.S. subsidiary said.

The automaker said eligible U.S. owners of nearly 500,000 VW and Audi models equipped with 2.0 litre TDI diesel engines can apply to receive a $500 prepaid Visa card and a $500 dealership card, and three years of free roadside assistance services.

The move was latest attempt to pacify owners who have been frustrated by how the German automaker plans to fix affected models. The company has warned it could rack up multi-billion-euro costs to remedy the issue and repair the damage to its reputation.

"I guess it's a very small step in the right direction. But far from what I'd like to see in terms of being compensated," said Jeff Slagle, a diesel Golf owner in Wilton, Connecticut.

The scandal erupted in September when VW admitted it had rigged U.S. tests for nitrogen oxide emissions. The crisis deepened last week when it said it had understated the carbon dioxide emissions and fuel consumption of vehicles in Europe.

VW said on Monday it continues to discuss potential remedies with U.S. and California emissions regulators, including the possibility that some of the affected cars could be bought back from customers.

In Washington, Democratic Senators Richard Blumenthal and Edward Markey on Monday decried VW's consumer program as "insultingly inadequate" and "a fig leaf attempting to hide the true depths of Volkswagen's deception."

The senators said VW "should offer every owner a buy-back option" and "should state clearly and unequivocally that every owner has the right to sue."

Late Monday, attorneys general from 47 states and the District of Columbia issued a statement saying the automaker's offer to consumers "in no way diminishes the seriousness of the deceptive practices and environmental harms" being investigated by the states.

Slagle, who bought his vehicle in 2011, said he was surprised there was still no plans for how to fix the cars: "Even though they're clearly culpable, somehow they're in the driver's seat."

VW has said about 482,000 cars sold in the United States since 2009 with four-cylinder diesel engines had software installed that allowed the engines to pass government tests for smog-forming nitrogen oxide emissions, but pollute at levels far above government limits in normal operation.

Management, labour truce

In Germany, the financial impact of the scandal has exacerbated tensions between Volkswagen management and labour leaders over plans to cut spending by about 1 billion euros (US$1.08 billion) per year through 2019 at its core Volkswagen brand operations.

On Monday, Chief Executive Matthias Mueller issued a joint statement with the top labour representative at the company, saying the union would be involved in a series of talks during the coming 10 days in decisions about the company's future.

"In the current difficult situation we must take joint decisions which pay heed to the profitability as well as employment," Mueller said in the statement.

VW union chief Bernd Osterloh said last Friday the announcement of cuts by VW brand chief Herbert Diess had broken German rules on co-determination by executives and labour, and demanded immediate talks with company bosses.

Labour leaders are irritated by Diess who four months after taking the helm of the VW brand has also ordered a freeze on managerial promotions in a move that limits the clout of the works council, one source close to VW's supervisory board said on Monday.

"The challenges are huge but the workforce is backing the company as long as we manage to come up with a balanced strategy for investments, savings measures and future projects," Osterloh said.

VW's supervisory board is due to approve spending plans on plants, equipment and technology for coming years at a meeting on Nov. 20.

The 20-member panel, which gives nine seats apiece to workers and shareholder representatives, met at the Wolfsburg headquarters on Monday to discuss the latest findings on the diesel emissions scandal and the manipulation of carbon dioxide emissions data.

Separately, Volkswagen said its head of corporate communications, Andreas Lampersbach, quit on Monday, joining a wave of departures as the scandal over its manipulation of emissions tests escalates.

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