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Volkswagen could pay $19 billion in damages to US over emissions scandal

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Mike Blake/Reuters/File

(Read caption) A Volkswagen logo is shown on the front of an old Volkswagen van in Encinitas, Calif. The US Justice Department on Monday filed a civil lawsuit against Volkswagen AG for allegedly violating the Clean Air Act by installing illegal devices to impair emission control systems in nearly 600,000 vehicles, January 4, 2016.

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While it appears that Volkswagen has managed to get a handle on its emissions cheating scandal, with a handful of top executives now gone and a new focus on zero emission vehicles enacted, the German automaker is now facing a new hurdle, one that could potentially draw on for years and cost billions of dollars: lawsuits.

On Monday, the Justice Department sued VW in a federal court over the installation of the “defeat device” software discovered last September on close to 600,000 vehicles in the United States. The software’s purpose was to hide the true level of emissions of certain diesel models from the VW, Porsche and Audi brands from regulators. The Justice Department’s lawsuit is a civil case against VW for violating the Clean Air Act.

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Under the Clean Air Act, VW could be fined up to $32,500 for each of the affected vehicles fitted with a 2.0-liter diesel engine and up to $37,000 for each of the vehicles fitted with a 3.0-liter diesel engine. Thus, the total damage bill for VW could top $19 billion. A decision on the size of the penalty will be up to the presiding judge.

VW has admitted to installing the defeat device software on as many 11 million vehicles worldwide, meaning if similar suits are filed and are successful the damage bill could grow substantially. Regulators in other jurisdictions are still investigating the matter and affected customers are also looking at class action lawsuits.

In a statement, VW said it “will continue to work cooperatively with the EPA. on developing remedies” to bring its diesel vehicles “into full compliance with regulations as soon as possible.” The company also said it was working “to develop an independent, fair and swift process for resolving private consumer claims relating to these issues.”

Recently, VW said it had hired lawyer Kenneth R. Feinberg to design and administer a claims program related to the scandal. Feinberg was the lawyer that dealt with claims for General Motors Company’s [NYSE:GM] ignition switch scandal that led to paid compensation for 124 deaths.

Note, there could still be criminal charges as well. The Justice Department said this was just the first step in legal action against VW and that the move did not preclude a criminal charge or the targeting of individual persons involved.

VW is yet to announce a fix for affected cars in the U.S. because of the far stricter regulations here—a fix for most of the European models affected will start being installed this month. VW says it is cooperating closely with regulators here and should be able to present a solution soon.


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