On September 18, 2015, one of the biggest scandals of the last few years hit the second largest automobile manufacturer company of the entire world: the German Volkswagen. Researchers at West Virginia University found a small device installed in at least 500,000 German-made vehicles that roamed around the United States and informed the Environmental Protection Agency (EPA) that promptly accused VW of evasion of federal emission regulations. This small device was a true fraud: there are no other terms to define a software that was actually able to cheat emissions testing, letting the cars pass them as “clean vehicles”. The device installed in all four-cylinder Volkswagen and Audi-brand diesel cars produced from 2009 to 2015 was, in fact, able to activate itself every time it “sensed” when the vehicle’s emissions were actively tested. During everyday car driving instead, the cheating system went offline, leaving the car free to pollute much more than the Clean Air Act and California’s state pollution-control regulation maximum emission allowance permitted. Those cars in fact emitted the dangerous and harmful nitrogen oxides at up to 40 times the standard level, as the EPA explained.
The EPA’s Office of Enforcement and Compliance Assurance stated that “using a defeat device in cars to evade clean-air standards is illegal, and a threat to public health”, and together with the California state authorities demanded an official explanation for the identified emission problems. In what could be considered the peak of the Volkswagen scandal, the German company admitted that the devices used to cheat emissions testing were installed all around the world in more than 11 million total cars. The vehicles where the device was installed were the VW diesel Jetta, Jetta SportWagen, Beetle, Beetle Convertible, Audi A3, Golf, Golf Sportwagen and Passat. In just a few days the CEO Martin Winterkorn had to sign his resignation letter, and company’s stock prices dropped by a hefty 30%. German prosecutors announced a criminal fraud investigation against the CEO, who could be deemed responsible for the damage caused to both the company and the numerous car owners.
Could the Volkswagen 2015 class action lawsuit be most expensive in the automobiles history?
Not only the German company is going to face fines of up to $18 billion issued by the U.S. government (up to $37,500 for each of the 482,000 diesel vehicles in the US territory), but dozens of Volkswagen lawsuits are going to be filed by angry customers. The main issue here, is the fact that this device is built inside the engines, and that its sole purpose is to evade emission controls, so turning it off won’t solve the problem that these vehicles’ circulation will be prohibited. Although the technical details weren’t yet disclosed, it’s quite clear that enabling emission controls will probably degrade the performance and fuel economy of the turbodiesel (TDIs) cars making them slower and much less efficient. And this is widely unacceptable, as the main selling points of these vehicles were efficiency and performance above anything else. Volkswagen will be sued by millions of consumers worldwide for the damage resulting from the consequential loss of value that will make their vehicles impossible to be sold. Cars will also suffer from a greatly reduced efficiency and increased eco-footprints, even though they were advertised as “Clean Diesels.” Although the German colossus assured that the vehicles “remain technically safe and roadworthy,” consumers will be forced to suffer reduced resale values, and increased fuel consumptions and expenses for vehicles that they actually paid much more than their actual value. Refitting cars will also require considerable expenses not just because of the car parts costs, but in terms of hours of labor, whose rates could only be reimbursed for fixed amounts detailed in the recall order.
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The Volkswagen recall could easily become one of the most expensive in the history of cars as Volkswagen diesel lawsuits start to pile up as both owners, and the US and European governments start suing them. The German automobile manufacturer faces a criminal investigation in its own country and also by the U.S. Justice Department, and up to 45 US states are starting a joint investigation for environmental and consumer-protection laws violations. Because consumers had to pay significant extras for their “clean diesel” engines, more than 229 Volkswagen class action lawsuit are being filed in federal courts through the US, and claims can easily amount to billions of dollars. Volkswagen’s U.S. President and CEO, Michael Horn, publicly admitted that his company has “totally screwed up.”
Lawsuits piling up against Volkswagen
The first US state to issue a Volkswagen Federal lawsuit was West Virginia, whose Attorney General Patrick Morrisey is asking the car giant to repay car owners for the $6,855 they paid as extras for the allegedly clean diesel engines, plus $5,000 in civil penalties per violation of West Virginia’s consumer protection law. In Texas, the Harris County, home to Houston, issued a VW lawsuit suing the manufacturing company for more than $100 million. “These tampered cars were emitting nitrogen oxides or NOx, every day well in excess of legal limits,” explained county attorney Vince Ryan in a press release: “Volkswagen’s deceitful acts have damaged the county’s ability to improve air quality, reach clean air attainment status and protect our citizens.” Other countries such as South Korea, UK, Canada and Australia are considering the opportunity to recall VW accused vehicles, and probe thousands of cars to add criminal allegations to VW lawsuits.
Volkswagen’s U.S. shareholders filed another VW class action lawsuit, as the company stock value lost more than 30 percent of its value since the scandal hit the newspapers. Darren Robbins, the Atlanta attorney who filed the Volkswagen shareholders lawsuit, explained that the stock market dropped so rapidly as “the senior executives named in this lawsuit misrepresented the very nature of the product they were selling”. To defend their interests against the recall, Volkswagen has hired its own lawyers: Kirkland & Ellis LLP, the law firm that led BP’s defense for the Deepwater Horizon criminal case back in 2010.
To address the Volkswagen recall and pay fines and litigation costs, the company set aside a fund of $7.2 billion (6.5 billion EUR), hoping it would suffice to cover all the expenses they are going to endure. However what’s even more at stake here is the public image of the company itself, as this blatant cheat is a terrible hit to VW’s perceived integrity. “Volkswagen does not tolerate any kind of violation of laws whatsoever” said the company in a recent public statement, “It is and remains the top priority of the Board of Management to win back lost trust and to avert damage to our customers. The Group will inform the public of the further progress of the investigations constantly and transparently”. However as Steve Fowler, editor-in-chief of Auto Express, said: “If Volkswagen are cheating in one emissions test, how many more have they been cheating on? This could be just the tip of the iceberg”.
REFERENCES
- EPA, US. “Notices of Violations | Cars and Light Trucks | US EPA”. www3.epa.gov. http://www3.epa.gov/otaq/cert/violations.htm Retrieved 2015-10-08.
- “U.S. Justice Dept. conducting criminal probe into Volkswagen’s rigged emissions -Bloomberg”. http://www.reuters.com/article/2015/09/21/usa-volkswagen-justice-idUSL1N11R1P620150921 Reuters. 2015-09-21. Retrieved 2015-10-08.
- “Phase Two of the Volkswagen Scandal: Lawsuits”. The Atlantic (in en-US). http://www.theatlantic.com/business/archive/2015/09/vw-volkswagen-lawsuits-emissions-scandal/407800/ Retrieved 2015-10-08.
- “VW emission recall could be the most expensive ever”.Yahoo Finance. http://finance.yahoo.com/news/vw-recall-could-be-the-most-expensive-ever-194521326.html Retrieved 2015-10-08.
- Pettersson, Edvard. “Volkswagen Sued by West Virginia Over Clean Diesel Claims”. Bloomberg.com. http://www.bloomberg.com/news/articles/2015-10-06/volkswagen-sued-by-west-virginia-over-clean-diesel-claims-ifer2tox Retrieved 2015-10-08.
- “A Texas County Just Sued VW for $100 Million Over Its Diesel Emissions Scandal”. CityLab (in en-US). http://www.citylab.com/crime/2015/09/texas-sues-vw-for-100-million-over-its-emissions-scandal/408163/ Retrieved 2015-10-08.
- “Volkswagen Group Volkswagen AG has issued the following information:”. volkswagenag.com. http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2015/09/Volkswagen_AG_has_issued_the_following_information.html Retrieved 2015-10-08.
- “UK drivers to sue Volkswagen for billions”.Mail Online. http://www.dailymail.co.uk/news/article-3246834/UK-drivers-sue-Volkswagen-billions-Class-action-threat-fiddled-diesel-tests.html Retrieved 2015-10-08
- “Volkswagen Facing Billions in Fines; Lawsuits From Vehicle Owners, Shareholders, Dealers”. KTLA. http://ktla.com/2015/09/26/volkswagen-facing-billions-in-fines-lawsuits-from-vehicle-owners-shareholders-dealers/ Retrieved 2015-10-08.
- “Volkswagen Class Action Recall Lawsuit Lawyers | Assistance” https://www.levinlaw.com/volkswagen-recall-class-action-lawsuit-lawyers Retrieved 2015-11-01.