The recent Volkswagen scandal has not only angered many of its customers, it also is threatening the prospects of hundreds of dealerships around the country that are anxious to learn how to fix diesel cars that intentionally thwart emissions tests.
And it is happening at a delicate time for Volkswagen and its 650 dealers in the United States, where sales have slumped in recent years while the domestic car market rebounded.
For several years, U.S. dealers complained to Volkswagen that it was offering the wrong cars for the domestic market and that its prices were too high compared with its rivals.
But the appointment last year of a new German top executive in the United States, along with a major commitment to build a new sport utility vehicle for the U.S. market by next year, had raised hope among dealers that they could turn their fortunes around.
Instead, the dealers are on the front line of a controversy that has tarnished the carmaker's reputation and could undermine sales.
"The recent events unfolding globally regarding the diesel scandal have hit the dealers in the U.S. extremely hard," said Alan Brown, chairman of the Volkswagen National Dealer Advisory Council, who runs two Volkswagen dealerships in Texas.
For now, dealers must manage the expectations of angry car owners harmed by Volkswagen's deception while engineers at the company's headquarters in Wolfsburg, Germany, figure out how to fix the diesel cars so they comply with emissions standards while still retaining performance and fuel economy.
Volkswagen revealed last week that it had sold 11 million diesel cars with software that lowered pollution levels during emissions testing. Volkswagen's new chief executive, Matthias Mueller, said he expected to have a remedy submitted to regulators in the next few days.
About 482,000 of those cars equipped with the cheating system were sold in the United States, according to the Environmental Protection Agency. Those will have to be recalled and fixed. Car dealers also are stuck with hundreds of diesel-engine cars on their lots that they can no longer sell until Volkswagen fixes the emission problem.
Three days after admitting to its deception, Volkswagen told its dealers that it would provide financial guarantees and extra bonuses to "stabilize your profitability in the near term."
As part of its financial support, Volkswagen said it would offer to reimburse dealers for the cost of holding on to diesel cars affected by the sales freeze until repair instructions were released. The company also will pay dealers $300 for any new gasoline-powered car they sell and $600 for Passat models, and will guarantee extra bonus compensations for dealers for cars sold in the third and fourth quarter this year.