Investors are suing Volkswagen €10 billion ($11.7 billion) in damages because it released its ad hoc notification informing shareholders about the Dieselgate emissions cheating scandal too late. But even though evidence is piling up that VW should have informed its stakeholders earlier, the company is still refusing to set reserve money aside.
The company’s report for the first six months of 2017 reveals that it still hasn’t reserved cash for potential fines.
Although VW admits that top US and German managers confessed to software manipulation in the United States on August 19 and September 3, 2015, the carmaker only released information about the scandal to stockholders on September 22, 2015.
The firm claims that back then, an expert estimated a potential fine at around €100 million ($117 million), which would not have obligated Volkswagen to publish its wrongdoing earlier than it finally did.
Mr. Weil upon VW’s request omitted any references to admissions of guilt in August and early September.
Volkswagen’s US attorneys used this argument in June 2017 to defend the late notification before a German court, but it does not apply. The experts from law firm Kirkland & Ellis appraised the potential fine assuming that Volkswagen and US authorities would find an amicable solution. But considering how VW behaved for the two years prior to finally admitting its guilt on August 19, 2015, no one could have expected a civil settlement. After all, VW did not cooperate with US authorities but hindered their investigations, as we see in the admission of guilt to the US department of justice in January 2017.
That means at the latest after US development chief Stuart Johnson admitted to cheating emissions tests on August 19, 2015, VW should have made it clear to lawyers that an amicable solution wasn’t in the cards.
The argument gains strength from a speech given by Stephan Weil, a member of the VW supervisory board and former governor of the state of Lower Saxony. Before a state parliamentary committee, he admitted the manipulations, but at VW’s request omitted any reference to admissions of guilt in August and early September. Those dates might suggest that an earlier notification would have been warranted.
In his speech, Mr. Weil said: “This admission should have been made much earlier – another grave mistake.” This just underlines the fact that investors should also have been informed earlier.
In that case, VW should have started building reserves by the end of 2015 because it didn’t provide sufficient information to stakeholders. Investigators should check and confirm VW’s previous statements if the company hopes to stand by its already shaky claims.
And VW should take steps to properly deal with Dieselgate’s disastrous fallout. Its current strategy of postponing and denying is utterly wrong and endangers the company’s future.
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