Volkswagen Named in Lawsuit Against Ontario Dealer
It wasn’t bad enough that Volkswagen of America Inc. shocked consumers with a recall just weeks after its New Beetle went on sale.
Now the company finds itself on the wrong end of a lawsuit claiming it helped a Southern California VW dealer renege on a deal to supply seven enthusiasts with 13 of the retro-styled cars as soon as they were available.
The suit underscores what VW fans say has become a nagging problem--dealers short-circuiting reservation lists to sell cars at inflated prices to walk-in customers.
VW declined to comment on matters in litigation but said that the case, filed May 8 in San Bernardino County Superior Court, is the only one involving the New Beetle. Industry insiders say it is unlikely to sour enthusiasm for the cars.
Even the recall of the first 10,100 Beetles sold in the United States and Canada hasn’t done that. VW announced the recall May 13 when it found a rough edge on the cars’ battery trays that could abrade wiring insulation.
In addition to making repairs, VW authorized dealers to give each Beetle owner up to $100--in cash or services--to help take the sting out of landing a bum Bug. The $1-million cost can be written off as a marketing expense and is negligible, but the goodwill was priceless.
VW says that about half the cars affected by the recall now have been repaired and that all should be fixed by early summer.
The suit against VW and Exclusively Volvo-Volkswagen-Subaru in Ontario will take awhile to go away, however. And while being litigated, it will keep a spotlight on efforts by some VW dealers to boost profits while the Beetle remains in tight supply.
Most early birds who made deposits before it was clear that the New Beetle would be wildly popular have agreements to buy the cars without options that can boost dealers’ profits.
So instead of selling stock cars--which are being shipped from the factory in Mexico with equipment packages that raise the cost on most to about $17,000--some dealers have begun adding fancy options like wheels, pinstripes and stereos and charging premium prices. If those who reserved early balk at paying extra, the cars are put on the showroom floor.
“We’re hearing of prices as high as $25,000,” said Bruce Simurda, editor of Hot VWs magazine, which recently published a warning about the “sticker markup game.”
The suit, which alleges fraud and breach of contract, was filed by a group led by Christopher A. Cocks, owner of two VW parts businesses in the desert community of Hesperia.
The suit says Exclusively claimed it was told by Volkswagen not to sell any more cars to the Cocks group. In an interview, dealer Gary Sherman said he did not receive such an order from the Michigan-based importer.
Sherman said he has refused to sell the cars to Cocks and his group because he believes they are buying the cars to resell for a profit.
As to the issue of dealers demanding premium prices, VW says that it has repeatedly urged dealers not to inflate prices because of demand, but that it is powerless under antitrust laws to stop them.
