Emissions Scandal

American Dream Turns Sour for Volkswagen

Mueller (2)dpa distorted
For the VW CEO, the year will be a tough one.
  • Why it matters

    Why it matters

    If Volkswagen cannot persuade the U.S. authorities it is doing all it can to atone for the emissions scandal, it will be hit by heavy fines.

  • Facts

    Facts

    • The United States has sued Volkswagen for breaking the Clean Air Act.
    • Total fines could theoretically amount to more than $50 billion, but are expected to be significantly below that number.
    • About 11 million cars worldwide, of which 600,00 in the United States, contain manipulated engines, which lower nitrogen oxide emissions during tests but increase them when driving on the road.
  • Audio

    Audio

  • Pdf

 

For Matthias Müller the New Year could hardly have had a worse start. A few days before the Volkswagen chief executive’s visit to the important North American International Auto Show in Detroit the U.S. Justice Department filed a complaint against the automobile company. The timing was hardly a coincidence. Mr. Müller can forget any hopes he had of reaching a settlement with the U.S. authorities any time soon.

On the contrary, Volkswagen is now facing a long and expensive legal confrontation with the American government, which has announced it will use all the legal means at its disposal in the dispute about manipulated emission levels. Indeed, the emissions scandal could escalate to an unprecedented transatlantic legal dispute. That is neither good for Volkswagen nor for Germany as an industrial location.

There are several indicators as to just how seriously the U.S. government is taking the legal action against Volkswagen. The Justice Department has included in its application a possible fine per vehicle affected of up to $37,500. As the prosecutors are accusing Volkswagen of offending against several clauses, total fines could theoretically amount to more than $50 billion. For this to happen, Volkswagen would have to be found guilty on every charge, allowing maximum penalties to be imposed.

It is unlikely that it will come to such draconian penalties – penalties which would hit Volkswagen very hard. But the risk has now increased and the almost €7 billion (€7.5 billion) in provisions Volkswagen has made so far to deal with the emissions scandal, will be insufficient.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.