Lawsuit tsunami headed for Volkswagen | Business| Economy and finance news from a German perspective | DW | 24.09.2015
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Lawsuit tsunami headed for Volkswagen

VW's emissions cheat scheme has left many diesel buyers feeling betrayed. Now, dozens are lining up to get even, as prosecutors prepare what could become the biggest-ever class action lawsuit against the company.

As damning details continue to trickle in about Volkswagen's scheme to thwart US emissions tests, it's becoming increasingly clear that the German car giant will more than pay the prize for its hubris.

On Friday, the US Environmental Protection Agency (EPA) warned that VW could face penalties of up to $18 billion (16.1 billion euros) for its cheating ways. But for some across the Atlantic, that won't be enough. They want to watch the German Goliath bleed.

One of them is Bob Rand, who bought his Passat diesel last year for its clean emissions and high gas mileage. He told Reuters news agency he liked the car so much he convinced his son and a friend to buy one, too. Today, the three represent just a fraction of the betrayal nearly 500,000 US buyers feel after news of the deception broke.

"Volkswagen was somebody that you could rely on for cutting-edge products and quality and all those things and now you find out that they're not above lying just flat out," Rand told Reuters. "That's probably about as bad a thing as a company can do is lie to your face when you're buying a $35,000 car."

'Amazing deception'

He's now one of at least three dozens in the US, who plans to join a class-action lawsuit against the automaker. According to research by German daily Süddeutsche Zeitung and public broadcaster NDR, 37 plaintiffs have signed up since Friday. The list includes private buyers and at least one car dealer, and it is likely to grow, as investigators continue to comb through Volkswagen's files.

Steve Berman, a managing partner at Seattle-based Hagens Berman LLP law firm, is one of several lawyers, who has spent the past days reaching out to disgruntled VW diesel buyers, like Bob Rand, hoping to add them to his roster of plaintiffs.

In a video posted on YouTube, Berman makes a strong-worded case for why VW should bleed:

"What an amazing deception. People bought these cars because they were [billed as] clean cars, they paid a premium for these cars, because they were [supposed to be] clean cars. So not only did they not get what they paid for, but these cars were actually harming the environment," Berman says in the video, referring to findings that VW's so-called "clean diesel" cars in fact emitted up to 35 times as much hazardous nitrogen oxide as allowed under US law.

The letter

A letter uncovered this week will likely add further fuel to the raging fire of outrage. The document, dated April 2015 and obtained by Reuters, was sent by Volkswagen of America to California owners of diesel-powered Audis and VWs, informing them of an "emissions service action" affecting the vehicles.

The owners were also asked to visit their local dealership for a software update, meant to ensure tailpipe emissions were "optimized and operating efficiently."

But according to Reuters, the letter forgot to mention the reason it was taking the action: "[to satisfy] government regulators, who were growing increasingly skeptical about the reason for discrepancies between laboratory emissions test results and real world pollution from Volkswagen diesel cars."

The move was part of a months-long, national, voluntary recall, agreed with the California Air Resources Board and the EPA in December 2014, which Volkswagen had insisted would "fix" a technical glitch leading to the divergence. Looking in the rearview mirror, the letter suggests this was just one of many steps VW took to mislead US authorities.

More damage Down Under?

But Volkswagen's troubles extend far beyond the US. Just north of the border, in Canada, the company can expect at least two further lawsuits, according to Süddeutsche and NDR.

The Australian Competition and Consumer Commission (ACCC) is also weighing legal action, as it awaits information from Volkswagen on whether the 50,000 diesel vehicles sold there since 2009 had been fitted with the surreptitious software.

German disilliusion

But the pain may be biggest at home, where the shocking revelations have dealt a blow to the country's psyche. For decades, the nation's dark history had all but banished public outbursts of national pride. But the car industry was an exception to that unwritten rule. Audi, BMW, Mercedes and VW epitomized what made the country great: honest, hard work, precision, and unrivaled quality.

"Made in Germany" may just be the country's most valuable asset. But many fear that VW's trickeries might have done irreparable damage to that brand.

On Wednesday, several industry leaders scrambled to distance themselves from the misconduct of the country's disgraced carmaker. "We strongly criticize any form of manipulation," Ulrich Grillo, president of the association of German industries (BDI) said in a stern statement. "Made in Germany" still "stands for excellent products," he assured the world.

Meanwhile, German Transport Minister Alexander Dobrindt has launched a comprehensive investigation into Volkswagen. And on Wednesday, Braunschweig's public prosecutor said it had opened a preliminary investigation into the Group, which could lead to legal action.

Unpredictable consequences

But the billions of euros in potential damages may not be the biggest threat to the Wolfsburg-based company. For the iconic carmaker, which made Das Auto synonymous with German engineering wizardry, the biggest damage would be the irreparable dent to its image.

For Europe's biggest economy, the spillover effects could be even greater, ING chief economist Carsten Brzeski warns.

"If Volkswagen's sales were to plunge in North America in the coming months, this would not only have an impact on the company, but on the German economy as a whole," he told Reuters.

And that could have ripple effects across the Atlantic. The German car sector employed roughly 775,000 in 2014. "Should automobile sales go down, this could also hit suppliers and with the the whole economy," industry expert Martin Gornig from the Berlin-based DIW think tank told Reuters.

"That's why this scandal is not a trifle. The German economy has been hit at its core," said Michael Huether, head of Germany's IW economic institute.

Brzeski drew a parallel to another crisis that dogged Germany for years: "All of a sudden, Volkswagen has become a bigger downside risk for the German economy than the Greek debt crisis," Brzeski.

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