April 27, 2017

VW moves beyond criminal case, but not without a scolding

The New York Times

DETROIT — The criminal case against Volkswagen for its decadelong scheme to cheat on diesel emissions tests ended last week with a scolding, an apology and $4.3 billion in penalties.

The sentence, affirmed at a court hearing, had been recommended by federal prosecutors in January as part of a deal in which the German automaker agreed to plead guilty to three felony charges for illegally importing nearly 600,000 vehicles equipped with devices to circumvent emissions standards.

The conclusion of the criminal case, 19 months after the vast cheating operation was first revealed, was a milestone in Volkswagen’s recovery from a scandal that badly damaged its reputation and sales. Recently the company delivered an encouraging quarterly report, and has even been given permission to sell — with modifications — the diesel cars at the center of the case.

But the hearing in U.S. District Court in Michigan was a reminder of the cloud under which Volkswagen remained.

The judge, Sean Cox, chastised the automaker for the “corporate greed” that led to its “deliberate and massive fraud” against consumers and regulators.

And while seven Volkswagen executives have been criminally charged for their roles in the scandal, the judge said more blame should be put on the company’s top management and its supervisory board.

“It’s not the management at VW, the ones who get paid big salaries and high bonuses, it’s the little guy,” he said. “The person who has really been hurt is the man or woman who labors at Volkswagen to make a car.”

Volkswagen’s general counsel, Manfred Doss, said the company felt remorse for its wrongdoing and was committed to changing its corporate culture and restoring its battered reputation.

“We let people down, and for that we are deeply sorry,” he said.

The settlement of the criminal case brings the financial toll on Volkswagen to more than $20 billion in fines, penalties and other legal settlements, which include lawsuits brought by consumers who purchased cars that emitted illegal levels of harmful pollutants.

Volkswagen will also be on probation for three years and will be supervised by an independent monitor who will oversee compliance with ethics and regulatory measures. Larry D. Thompson, a former deputy U.S. attorney general, was appointed to the post on Friday.

In addition, the automaker has agreed to cooperate with investigations by the Justice Department and the authorities in Germany and elsewhere. More than 11 million vehicles worldwide were involved in the systematic falsification of emissions tests.

In accepting the plea agreement, Cox declined to make Volkswagen pay criminal restitution to consumers in addition to a $2.8 billion fine and a $1.45 billion penalty to resolve environmental and customs-related civil claims brought by regulators.

“I do believe it does provide a just punishment for the corporation,” he said, adding that he hoped other companies would “learn from this and think twice” before breaking the law.

The automaker is required under its government settlement to buy back or repair the vehicles equipped with “defeat devices” that allowed them to fraudulently pass federal emissions tests.

Volkswagen said last week that it had bought or fixed about half of the cars involved that have 2.0-liter engines, which represent the bulk of the affected vehicles.

The company is also making strides in returning some of the repaired vehicles to the U.S. market. Last month, Volkswagen received approval from the Environmental Protection Agency to sell about 67,000 vehicles that had received updated software as part of the overall emissions repair approved by federal and state regulators.

In Canada, Volkswagen dealers have recently resumed selling 2015-model-year diesel cars that they had held in inventory since the emissions deception emerged.

Volkswagen’s vehicle sales fell sharply in the United States in the aftermath of the EPA’s accusations in September 2015 that the company had cheated on emissions tests.

But the brand is showing signs of recovery this year, with sales up 10 percent through March compared to the same period last year.

Its overall financial performance has also steadily improved. The company reported this week that its first-quarter operating profit rose 28 percent to $4.7 billion, which exceeded analysts’ expectations.


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