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Volkswagen Deals With the Storm

As ordered, on Thursday, April 21st, Volkswagen presented its ‘plan’ to a San Francisco Federal Court Judge for responding to alleged rigging of its diesel vehicles to cheat on emissions testing. Most media reports say more questions than answers still remain. Even the issue of buying back or fixing the ‘rigged’ cars in the US—estimated at roughly 500,000 vehicles— remains unclear.

The New York Times reported as a given that US owners will be able to choose between a fix or a buy-back, while lessees will be able to cancel without penalty. Automotive journalists say, however, that lack of clarity on the details—a buy-back price, parts, and labor costs, compensation/goodwill buy-back costs—has stalled out any semblance of progress on resolving even this basic first step of the embarrassing problem.

The longer the delay, the longer grows the line of the aggrieved, and the more creative their claims for compensation, remediation, and penance. And so far this is ‘just’ in the US. Media reports say Environment and Climate Change Canada will wait for the US plan to be finalized before ensuring it extends to Canadian vehicles.

In Europe, over 10 million vehicles are affected, although differences in air-quality regulations there are expected to result in less severe fines. Likewise, consumer compensation laws differ so that – while currently, Volkswagen is recalling European vehicles to reprogram their engine software and, in some cases, to install a part designed to lower emissions – it is not offering European owners any financial compensation. Criminal proceedings, however, have been a matter of speculation in a number of countries including Britain, France, Germany, and South Korea.

The line-up of the aggrieved that emerges from sorting through the various US media reports includes—in addition to owners and lessees—the US Department of Justice and the US Environmental Protection Agency seeking fines, criminal penalties, investment in clean technologies, and remediation of environmental impact from the excessive diesel emissions; a 45-state coalition currently investigating the penalties it may pursue.

The New York Times is also reporting that the New York State Attorney General, said Thursday’s announcement “does not in any way resolve” these potential claims; dealers of competing brands, now saying they want compensation for the unfair advantage Volkswagen ‘enjoyed’ in the marketplace thanks to its alleged cheating. Volkswagen dealers themselves appear to be struggling to cope with unsold vehicles and declining market share.

And, of course, Volkswagen investors aren’t happy. Uncertainty over the potential total cost of all US lawsuits has forced Volkswagen to delay earnings reports for the last two quarters, which has impaired its ability to raise money.

The New York Times reports that the Federal Court in San Francisco is overseeing almost all of the litigation in the United States, including claims filed by federal and state governments as well as Volkswagen owners.” June 21 is the new court deadline for Volkswagen to settle with the federal government and the lawyers for vehicle owners. In summing up the April 21st session, the Judge in the case is reported to have said, “There is still a lot of work to be done.” No doubt.

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