Volkswagen Fined A Record $4.3 Billion For Lying And Law-Breaking; Know About The Scandal
January 12th, 2017
“These individuals all held positions of significant responsibility at [Volkswagen], including overseeing the company’s engine development division and serving on the company’s management board … [They have] seriously abused those positions [and] we will continue to pursue the individuals responsible for orchestrating this damaging conspiracy.” – Loretta Lynch, Attorney General of the United States.
- In 2015, it produced approximately 9.87 million vehicles, the second-largest in the world.
- It has the largest market share in Europe for over two decades.
- Ranked seventh in the 2016 Fortune Global 500 list of the world’s largest companies.
Since its inception in 1937, the Volkswagen Group has emerged as one of the most recognised multinational companies in the world. It produces and sells millions of automobiles every year, employs over 600,000 people, and has an annual output of over $200 billion. The Group also owns many popular automobile brands like Audi, Bentley,m Bugatti, Ducati, Lamborghini, and Skoda. The Volkswagen Group is a forced to reckon with.
However, since late 2015, the company’s market share and output have consistently plummeted and its mentions in the media have always been in a negative light. The Volkswagen emissions scandal sparked international outrage, a high-scale investigation, and widespread public debate on automobile pollution and environmental regulation.
Below is the explanation of the scandal, presented in the form of a timeline of major developments in the story.
- The scandal erupts on 18 September 2015. The Environmental Protection Agency (EPA) of the United States of America (USA) issues a notice to Volkswagen alleging that the company is in violation of the Clean Air Act. The Clean Air Act is a US federal law designed to control air pollution and maintain air quality.
- The EPA accuses Volkswagen of intentionally programming its diesel engines to activate certain emissions controls only during the laboratory testing phase while emitting up to 40 times more toxic fumes during real-world driving.
- This programming was deployed in about eleven million cars worldwide and these models were manufactured between 2009 and 2015. The revelation was possible thanks to a 2014 vehicular emissions study conducted by the International Council on Clean Transportation.
- Following the expose, there is massive public outrage. The environmental impact of Volkswagen’s actions are correctly estimated to be adverse – and possibly irreversible. For one, emissions of NOx (particularly nitrogen dioxide) were higher by 500,000 to 1,000,000 tonnes every year.
- Environmentalists estimate that the hidden damage from the Volkswagen vehicles could equate to all of the United Kingdom’s NOx emissions from all power stations, vehicles, industry, and agriculture.
- The consequences on human health are also dire. NOx emissions are known to cause inflammation of the airways, aggravate heart problems, and result in serious respiratory ailments.
- The EPA orders Volkswagen to immediately recall all 482,000 of these cars which have been deployed in the US.
- Two days after the EPA’s order was issued, Volkswagen’s CEO admits to giving false emissions data. He says he is “deeply sorry” for having lied to the public and the authorities, and ensures an external investigation.
- Meanwhile, in the days following the EPA report, the Volkswagen Group’s stock price value falls by a third, nearly $12 billion is wiped off the company’s market share price, and the German Government warns that the scandal jeopardises the reputation of the country’s entire car industry.
- In the early months of January, the US Justice Department files a civil suit against Volkswagen seeking up to $46 billion for Clean Air Act violations.
- Later, the US Federal Trade Commission files a lawsuit against the company for false advertising which promoted its vehicles as environmental friendly. The Commission says US consumers suffered “billions of dollars in injury” because of the company’s lies.
- The Volkswagen Group sees a constant fall in market share throughout 2016 as criticism against it mounts even as authorities stiffen their investigation into the scandal.
- In October, Volkswagen agrees to spend up to $10.03 billion on vehicle buybacks and owner compensation. It also agrees to spend $4.7 billion on programs to boost clean-vehicle projects and diminish vehicular emissions.
- However, the crisis deepens on 6 November 2016 when Californian regulators discover that software installed in Volkswagen’s Audi engines was rigged to produce lower carbon dioxide.
- The same month, an embattled Volkswagen announces that it will stop selling diesel vehicles in the United States. Soon after, it is declared that an “agreement in principle” has been reached to provide “substantial compensation” to owners of the recalled Volkswagen vehicles.
- On 11 January, the US Government orders Volkswagen to pay a record $4.3 billion penalty after the Group pleads guilty.
- Six former Volkswagen executives have been charged. They will each be tried and sentenced. However, five of them are in Germany and it is not clear if they will face repercussions in the US since Germany would not extradite its own citizens.
- The company is ordered to pay $2.8 billion as criminal fine and a further $1.5 billion in a civil settlement. The $4.3 billion penalty is the largest ever levied by the US Government on an automobile manufacturer.
- Volkswagen will also spend three years on probation and an independent monitor is to be set up to “oversee its ethics and compliance program”.
The Volkswagen emissions scandal & India.
The Automotive Research Association of India (ARAI) investigated if Volkswagen vehicles had circumvented Indian laws and regulations on vehicle emission testing. According to the report by ARAI, Volkswagen installed defeat software in diesel engines of many models. A little over 300,000 cars sold in India are likely to have used this defeat device. The finding also stated the presence of emission testing defeat software as “not a product failure but a clear case of cheating”. It was also added that the Government is “duty-bound” to ask the Central Bureau of Investigation to institute a probe.
“It is now clear that Volkswagen’s top executives knew about this illegal activity and deliberately kept regulators, shareholders and consumers in the dark – and they did this for years … We can’t put companies in jail but we can hold their employees personally accountable.” – Andrew McCabe, Deputy Director of the FBI.