Volkswagen To Pay The Biggest Fine For Automakers In the US

On Friday, a federal judge in Detroit ordered the German automaker to pay a $2.8 billion criminal penalty. The penalty was part of a negotiation the car maker embarked on last January with the U.S. Justice Department.

VW was caught falsifying data for two of its diesel engines in order to pass the U.S. emissions tests. With this new ruling, the costs of this act is almost $30 billion. This number includes buying back around 500,000 cars sold in the US. Also several former and current Volkswagen employees were charged in crimes relating to the scandal. A separate investigation is ongoing in Germany.

Judge Sean Cox called the scandal a “very serious and troubling case involving an iconic automobile company,” and said: “I just can’t believe that VW is in this situation that it finds itself in today.”

Biggest fine:

This deal surpassed those the US government has previously made with other carmakers, such as Toyota, General Motors, and Japanese airbag supplier Takata, making it the biggest criminal fine the US government has ever negotiated.

The company’s tone was, however, remorseful. General Counsel Manfred Doess said to the court: Volkswagen deeply regrets the behavior that gave rise to this case. Plain and simple, it was wrong,”

The company also issued a statement saying it has “taken significant steps to strengthen accountability, increase transparency and transform our corporate culture.”

To ensure that VW keeps its word, former U.S. Deputy Attorney General, Larry D. Thompson, will be an Independent Compliance Monitor. His task will be ensuring that the company adheres to the terms of the deal for a probation period of three years.

How did the scam begin:

The scam started when VW engineers weren’t able to find a technical solution to manufacture diesel cars that covered all requirements; they needed to be quick, fuel efficient, and also adhere to strong emissions standards.

The judge stated: “Who has been hurt by this corporate greed? From what I can see it’s not the managers at VW, the ones who get paid huge salaries and large bonuses. As always it’s the little guy,” he was referring to the Volkswagen customers and the company’s workers.

The payout:

The company will pay billions to its customers who bought the tampered cars. In addition, German supplier Bosch, who was also in on the scam, set a smaller fund aside.

VW reached a civil agreement in July 2016 for $14.7 billion with the EPA as well as other federal agencies, and California authorities. The company agreed to re-buy the diesel cars it sold in the US, paying more than $10 billion. The agreement also contained funds to counterbalance the extra pollution those cars created. As well as money to advertise for vehicle technology with zero-emissions, such as ones powered by batteries.

Another civil settlement was reached last year involving the 3.0-liter engine. The company was able to negotiate a deal to repay the losses of its U.S. dealers. The company’s U.S. volume sales was comprised of almost 20% in diesel models, at some point.

Although VW received approval to fix and sell the diesel models in the US, but Herbert Diess, the global VW brand boss stated that the company will not sell diesel models in the U.S. any more.