• Monday, October 22, 2018
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Business Breaking

Volkswagen agrees to $1.2B German fine in emissions-cheating scheme

  • NEW YORK TIMES

    A Volkswagen dealership in Raynham, Mass., in 2016. A backlash against diesel — once the fuel of choice in Europe — began in 2015 after the German carmaker Volkswagen admitted to programming engine software to dupe regulators about nitrogen oxide emissions.

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FRANKFURT, Germany >> Even after Volkswagen was hit with billions of dollars in penalties in the United States over an emissions-cheating scheme that continues to unfold, the company remained mostly unpunished in Europe.

That changed today, when German prosecutors said they had imposed a fine of 1 billion euros, or $1.2 billion, on the carmaker for failing to properly supervise the employees who devised and deployed illegal software in diesel models to evade pollution controls. In a statement, the Braunschweig state’s attorney’s office described the penalty as one of the largest ever imposed on a company in postwar Germany.

The fine, based in part on how much money Volkswagen is estimated to have saved via the cheating scheme, pales next to the roughly $26 billion the company has paid in the United States to settle criminal charges and civil suits. But it is a signal that German authorities will not let the carmaker escape punishment despite its political clout and importance to the national economy.

Herbert Diess, Volkswagen’s chief executive, said the penalty was “a further essential step” in the company’s efforts to move past the diesel scandal.

“We are working intensively to deal with our past,” Diess said in a statement Wednesday. “Further steps are necessary to restore trust in our company and the auto industry piece by piece.”

Volkswagen has admitted installing software in 11 million diesel vehicles that caused pollution controls to operate properly only when an engine’s computer determined that the car was undergoing a test. Under actual driving conditions, the vehicles produced much more lung-damaging nitrogen oxides than allowed by law.

Although the vast majority of the vehicles at issue are in Europe, the financial penalties were much stiffer in the United States because of the country’s stricter enforcement regimen and a legal system that is more favorable to consumers.

Volkswagen’s costs from the cheating scheme keep growing in the United States. On Wednesday, Vermont’s attorney general, T.J. Donovan, said the state had reached a $6.5 million settlement with Volkswagen and its Porsche and Audi units related to the emissions scandal.

Germany and most other European countries do not allow class-action lawsuits of the kind that forced Volkswagen to pay damages to the owners of 600,000 diesel vehicles in the United States and to fix or buy back the cars.

The European Union also has no central enforcer of clean air rules that is the equivalent to the Environmental Protection Agency, and regulators in individual European countries paid little or no attention to whether cars were polluting more than was acceptable.

German prosecutors are continuing their investigations into about 70 current and former Volkswagen employees, including a member of the management board and a former chief executive.

Those inquiries will probably continue to pose a threat to Volkswagen’s reputation. The company also faces civil suits in Europe brought by shareholders who accuse it of shirking its duty to them. If successful, the suits could cost Volkswagen an additional 10 billion euros, about $11.7 billion.

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