States probe VW over emissions, look for settlement money

20 Oct 2015 | Author: | No comments yet »

Expanding investigation of VW by US states could take years, result in costly settlement.

WASHINGTON – An expanding investigation into Volkswagen’s emissions-cheating scandal launched by state attorneys general could last years and will likely end in a negotiated settlement. Over two thirds of German consumers (65 percent) believe that the embattled German carmaker still builds “outstanding” cars and that the emissions scandal was overdone, a recent survey by market research firm, Prophet reveals.Sixty-five percent of respondents in a poll conducted earlier this month thought the scandal had been exaggerated and that VW still built excellent cars, according to the management consultancy Prophet, which carried out the research. Forty-five states and D.C. have joined the review, investigating how VW was able to game emissions tests to hide that its “Clean Diesel” cars emitted smog-causing exhaust up to 40 times dirtier than the law allows.

Three quarters said they would still buy a VW car if they liked the vehicle and the price, and 63% expected the affair to be largely forgotten within a year. Six out of 10 said they did not believe the “Made in Germany” label would be damaged by the scandal in the long term, and 63 percent believed the affair would soon be forgotten. The attorneys general are likely to seek compensation for consumers and redress for environmental harm, building their own investigations under state laws that protect consumers from deceptive trade practices and set clean air standards. “This is a really important case and it has big economic and health consequences. A month after Volkswagen admitted to regulators that its diesel cars were rigged to cheat on U.S. emissions tests, no concrete answers are forthcoming on how the company will compensate owners, nor how dealers should deal with them. Volkswagen admitted in September that it has been cheating in diesel emissions tests by using a software defeat device that made 11m cars worldwide appear less polluting under lab conditions than they were on the road.

Some Germans have expressed concern that VW’s problems could harm other businesses that depend on the country’s reputation for engineering prowess and reliability. It’s nowhere near the scale of tobacco but you are kind of in that realm,” said former Wisconsin governor and attorney general Jim Doyle, who participated in the multistate investigation that ended with a landmark settlement against tobacco companies in 1998. “This is the kind of case that you elect an AG for, to stand up for the safety and health of the people of the state.” The case, in some respects, presents a slam dunk: Volkswagen has already admitted wrongdoing, affecting roughly a half million cars in the United States. “This case makes me miss my AG days because there’s such an opportunity to send a message, and the states can be at the forefront of sending a message,” said Sen.

The German auto maker has said it will begin fixing the first of the nearly 500,000 non-compliant Golfs, Jettas and Passats from model years 2009-2015 in January, but earlier models will require hardware changes and could take longer. “I’m kind of resigned to the waiting period but it’s frustrating, as I feel like I’m in limbo,” said a San Francisco Golf owner, Janet Kornblum. Auto industry consultant said on Monday the price of used VW diesel vehicles sold at auction by dealers to other dealers dropped 6.5 per cent, based on Sept. 1-Oct. 9 data.

The motor industry accounts for more than 750 000 jobs in Europe’s biggest economy, and politicians from Chancellor Angela Merkel down have rallied around the sector. * E-mail your opinion to [email protected] and we will consider it for publication, or use our Facebook and Twitter pages to comment on our stories. Blumenthal said he was stunned by news that the world’s largest carmaker had rigged its software to dupe emissions tests. “Astonishment bordering on disbelief that a company could be so absurdly arrogant and lawless that it would knowingly engage in this type of conduct,” he said.

When the news broke in September, the scandal was described as a “massive blow” to the firm, with the company believing that some 11 million cars were affected by the emissions test worldwide. A Prophet spokesman said the company had not expected the response to be so positive for VW. “The quality of the cars is not questioned,” said Felix Stöckle. “The long-term damage to the brand could be much smaller than many observers predict today.” After the scandal broke some predicted a severe decline in the value of the VW brand, which tends to be one of the most trusted in Germany. For comparison, a multi-state attorneys general investigation of ignition switch defects involving GM cars – a review that started shortly after GM announced a recall 20 months ago – remains active today. Automotive and brand specialists suggest that the best way the embattled automaker can recover its global standing is to rebuild its reputation with customers.. “Getting this reputation issue solved is a Herculean task. I’m not sure how they will approach this and how they will get consumer confidence over time,” Christian Ludwig, automotive analyst at Bankhaus Lampe told CNBC’s Worldwide Exchange, adding that the company may try to fix it with money. “Volkswagen is getting their act together,” Gonzalo Brujo, EMEA & Latin America’s CEO for Interbrand told CNBC, adding that there are some key strategies they must now follow. “I think they are doing everything behind the scenes to work against the crisis and solving every single test point, to make sure that at the end of the day, the consumer is happy with the cars that they are buying.”

On the online forum, one owner trying to sell his 2013 diesel Passat for $14,400 on Sept 18 was told by another member: “No one here will buy an ‘affected’ TDI until the VW fix is implemented, and that fix, whatever it is, may take a year to happen.” Volkswagen may want to deal first with any criminal charges, as the Justice Department investigates potential illegality by the company and its executives. Volkswagen sold more than 594,000 cars in Germany in the first six months of this year, making it the company’s second-biggest market after China, where it sold 1.74m vehicles. The Environmental Protection Agency and Federal Trade Commission are also investigating. “Until the criminal case clears, nobody is going to talk about civil. But, spokeswoman Jeannine Ginivan added, “We are cooperating with all investigations into the matter.” Blumenthal said it’s common for a few large, aggressive states to take a leading role – paving the way for settlements that benefit all.

In the second largest attorneys general settlement, the nation’s five largest mortgage servicers agreed to pay $25 billion in penalties and relief to homeowners in 2012. Illinois and New York have already sent subpoenas. “This will be a complicated case, no doubt,” said Peter Lavallee, spokesman for Washington Attorney General Bob Ferguson. “It’s consumers from many states. Multiple years are involved, multiple models of vehicles and all the facts are yet to be determined about who did what, when and for how long.” Former Wisconsin Attorney General Peg Lautenschlager cautioned that, despite Volkswagen’s early admission of wrongdoing, the case could prove challenging to resolve in a way that satisfies everyone. In pushing for redress, states will confront an economic reality: They want to compensate consumers and punish VW – but not help lead the company into insolvency. “The potential (settlement) is real high but in the real world, nobody wants to put this company out of business,” Tierney said. “The marketplace has to decide that.”

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