VW Boosts US Warranty, Adds $2.9 Billion to Diesel Cheating Costs

Volkswagen’s U.S. division on Friday introduced a new six-year/72,000-mile warranty on most new VW vehicles sold in the United States. The company calls it the “People First Warranty.”

Not only is the warranty longer than those offered by other carmakers, it is also transferable to subsequent owners during the six-year warranty period.

While it’s likely that VW is hoping for some good press after the diesel cheating scandal of two years ago, company headquarters in Germany issued a terse, two-sentence press release Friday announcing that the company will take a third-quarter charge of €2.5 billion ($2.9 billion) to boost its provision for North American buyback/retrofit programs related to the diesel scandal.

An executive with VW of America said of the new warranty program:

Volkswagen has begun to grow again in America, and buyers have welcomed the Atlas and Tiguan into their homes. Expanding this warranty beyond those two models gives our dealers another compelling argument for the rest of our lineup, and we believe it will lead to a reduced overall cost of ownership for buyers.

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In addition to the Atlas and Tiguan, the People First Warranty now covers additional 2018 VW models: Beetle, Beetle Convertible, Golf, Golf Alltrack, Golf GTI, Golf R, Golf SportWagen, Jetta and Passat.

In August, VW reported U.S. sales up 9% year over year for the month and 6.4% for the first eight months of the year. The company’s best-selling vehicle in the United States is the Golf SportWagen, which posted an 88% gain in August and a gain of 168% for the year to date.

Michelle Krebs, senior analyst at Autotrader, said:

While Volkswagen’s People First Warranty is intended to instill confidence in the brand’s products after the diesel scandal, it is also an important tool to help addresses new-car affordability. To keep monthly payments down, consumers are stretching auto loan terms. The Volkswagen warranty extends along with those loans to help save the first—and even second buyer of a VW—repair costs.

The $2.9 billion third-quarter charge for the U.S. diesel scandal was attributed to a higher-than-expected cost of fixing the cars. The latest charge raises the total U.S. cost to VW to just under $30 billion. As The Wall Street Journal pointed out, however, VW spins off enough cash to pay the costs of the diesel scandal, but that spending hampers its ability to invest in innovation. And the higher the total goes, the further behind VW could fall in the race to autonomous driving and electric cars.

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