Things are happening so quickly — almost daily — relating to the Volkswagen AG’s massive problems. I will only give a summary of the automaker’s problems so far. Volkswagen has admitted to systematically cheating U.S. air pollution tests, leaving the company vulnerable to billions in fines and almost certain criminal prosecution. The automaker sold diesel versions of Volkswagen and Audi cars with software that turns on full pollution controls only when the car is undergoing official emissions testing. During normal driving, the Environmental Protection Agency (EPA), the cars pollute 10 times to 40 times the legal limits. The EPA called the technology a “defeat device.”
Volkswagen’s admission that it cheated to make nearly half a million diesel cars appear cleaner-burning than they are leaves the automaker facing billions in fines, its executives risking criminal charges, and its U.S. expansion plans in peril. While the total potential liability at this junction is unclear, the EPA could fine the company $37,500 per vehicle, according to Cynthia Giles, the agency’s Assistant Administrator for Enforcement. With 482,000 vehicles involved, the total in EPA fines could be $18 billion.
In my opinion, based on what we have learned so far, Volkswagen should be prosecuted criminally for what it has done. The Department of Justice is investigating Volkswagen AG over the admissions. The criminal probe will provide an early test of the Justice Department’s newly stated commitment to holding individuals accountable for corporate wrongdoing. The department said last month that companies wanting to get credit for cooperating with investigators must name individuals they allege are responsible for the misconduct.
Government fines are not the only liability that the company is facing. The German automaker has gained a foothold in the world’s second-biggest car market with a strategy built in part on touting the efficiency of fun-to-drive “clean diesel” vehicles now shown to be anything but. Consumers should be upset, not just because of the emissions aspects and environmental impact of the scheme, but because of how the horsepower and fuel economy of VW vehicles are affected. The value of their cars will take a sharp decline. The vehicles affected include various model years of Volkswagen Jettas, Golfs, Passats and Beetles, as well as the Audi A3, with some affected vehicles ranging from as far back as 2009 to 2015, according to the EPA. Audi, which is mostly owned by Volkswagen, says 2.1 million of its vehicles are involved.
Volkswagen says that 11 million diesel vehicles worldwide are affected, and that it will cost the company $7.2 billion to remove the devices. On Sept. 22, Volkswagen CEO Martin Winterkorn resigned because of the scandal. He accepted responsibility and said he wants to create a “fresh start” for the company. It’s very likely that several officers at Volkswagen will be indicted. It was announced on Sept. 30 that the automaker was recalling up to 11 million vehicles and would refit them with new and legal software.
On top of the horsepower problem, the affected vehicles have definitely lost considerable value. “It’s a huge black eye for Volkswagen,” said Matt DeLorenzo, managing editor for news at Kelley Blue Book in Irvine, Calif. Consumer Reports magazine reacted by suspending its “recommended” rating of two diesel models. Consumers have been lied to for years and sold vehicles they were told had certain characteristics, which they clearly do not. Lawyers at Beasley Allen are working with other law firms around the country and they have filed a nationwide class action to redress these wrongs. There is more information about that lawsuit in this issue of The Report.
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