The Island of Unwanted VWs

A sea of unloved VW diesels sits awaiting its fate at the former Pontiac Silverdome football stadium.

Except for a handful of 2015 models, VW dealers can’t sell the cars until the company comes up with repairs to satisfy regulators. In the meantime, the company is hauling them to storage lots, such as ones at an abandoned NFL stadium outside Detroit, the Port of Baltimore and a decommissioned Air Force base in California.

“This could get drawn out for a long time,” said Dave Sullivan, an analyst with industry consulting firm AutoPacific Inc. “The question is how long will it take for VW to say ‘I give up?’” The buyback is a costly logistical headache.”

Six VW executives have been indicted and the company has set aside nearly $24 billion (22.5 billion euros) to cover cheat-related costs, including more than $10 billion to buy back vehicles in the U.S. A second buyback of around 20,000 3.0-liter diesel cars is expected to start in the coming months.

About 15,000 VW owners are showing up at dealerships each week now to sell their Jettas, Golfs, Passats, Beetles and Audi A3s to the carmaker in exchange for payments of as much as $40,000. The agreement dictates that the cars can’t be put back on the road without being brought into environmental compliance, something that is almost certainly impractical for most of them. Even exporting them to countries with lesser emissions standards is forbidden.

In all, around 288,000 owners or lessees had opted for a buyback or early lease termination as of Feb. 18, of which 138,000 had been completed, according to the latest update filed with a court overseeing the settlement. Another 52,000 owners have said they want to keep their cars and are awaiting a fix. Depending on the model, it could be a long wait. Regulators are reviewing repair proposals from the company, but the only cleared remedy applies to about 67,000 diesels from model year 2015 that the company recently won approval to market. They are equipped with the latest version of VW’s diesel engine technology and will be fixed in two phases: a software update available now and hardware retrofits when parts become available early next year.

Even with an EPA-approved repair, dealers expect many high-mileage, older diesels from 2009 and 2010 in poor condition to be scrapped. “They’ve determined that there’s a threshold where it’s going to be more cost effective to junk,” said Fred Emich, general manager of Emich Volkswagen in Denver. But receiving any used diesels would be “huge,” Emich said. “Where we’re feeling it the most is service,” he said. “They’ve taken about 200,000 cars off the road at this point, and those were all old cars that were good for service business.”

In the meantime, the buybacks will continue as the clock ticks toward a key date: June 30, 2019. That’s the deadline for VW to buy back or repair at least 85 percent of the 2.0-liter diesels, under the terms of a court-approved settlement with regulators. Falling short would mean the company must pay the U.S. Environmental Protection Agency $85 million for each percentage point below that threshold, plus $13.5 million to the California Air Resources Board for each percentage point shortfall in the state.

That helps explain the massive operation VW has erected to handle the buybacks. The company has hired around 1,300 contractors, including “settlement specialists” placed at VW and Audi dealerships, who cut buyback checks ranging from $12,500 for a 2009 Jetta to more than $40,000 for a 2015 Audi A3 TDI. “The public doesn’t realize the monumental undertaking that they’ve pulled off to do this in a year and a half,” said Matthew Welch, general manager of Auburn Volkswagen near Seattle. “Nothing like this has ever been done.”