With a lawsuit filed on Monday for up to $48 billion, 2016 didn’t get off to a good start for VW. But four months after the emissions scandal broke and with the financial fallout still being assessed, it’s easy to overlook the wider implications of the company’s alleged misdemeanours.
The legal action is being taken by the US Environmental Protection Agency (EPA) following an investigation by US regulators last September which forced VW to admit fitting ‘defeat devices’ to 11 million vehicles globally. The complaint, which we reported on previously here, alleges that nearly 600,000 diesel engined vehicles in the US had the emissions test cheating software installed and this “violated” clean air laws by virtue of the fact that the German manufacturer was selling cars that were different from those originally cleared for sale in the US.
With US officials sounding bullish in their use of such terms as “bringing Volkswagen to justice” it is clear Wolfsburg isn’t going to be let off the hook lightly. “We’re alleging that they knew what they were doing, they intentionally violated the law and that the consequences were significant to health,” said a senior justice department official.
Indeed, despite having set aside €6.7bn (£4.6bn) to cover costs, the financial implications of this latest court action could easily exceed VW’s worst expectations. In theory, according to a Reuters review of the US lawsuit, the firm could face fines of as much as $37,500 per vehicle for each of two violations, up to $3,750 per ‘defeat device’ and another $37,500 for each day of violation. That’s on top criminal charges and a raft of lawsuits filed by VW owners. No wonder VW shares fell by 6% to a six-week low on January 5th…
As stalwart VW enthusiasts it’s difficult not to feel slightly caught in the middle with the whole affair. With VW bosses having admitted to “totally screwing up”, there’s no doubt VW got it wrong. But the question is, how much should they be made to pay for it. Opinion is divided. Some say VW should be taken to the cleaners, while others are looking at the wider implications of such a financial drubbing. After all, it’s easy to argue that the people who will benefit the most will be the lawyers. From a wider perspective, the likely result of punitive financial penalties being imposed is a reduction in future research and investment which would be a shame given VW’s eagerness to push the boundaries regarding electric vehicle technology.
It might mean fewer new models and certainly a reduction in niche cars, sports models and concepts like the exciting new Design Vision GTI (below). Remember too Volkswagen employs millions of people worldwide from salesmen to cooks, car assembly workers and service technicians and with vehicle sales already being hit hard job losses could be another possible consequence of the US lawsuit.
Either way, we expect the ‘diesel-gate’ affair to rumble on throughout 2016 and while, as we reported here, values of nearly new VWs haven’t been massively affected the sorry affair is far from over. The continued bad press won’t necessarily affect the older VW market, and indeed classic Dubs continue to become more coveted, but there’s a school of thought that suggests that if VW’s reputation sinks it’s possible that the cars we love and cherish might not continue to receive the same level respect and admiration they’ve enjoyed up until now. What do you think?
Ian
The opinions expressed here are the personal opinions of the author and do not necessarily represent the views and opinions of VW Heritage