Volkswagen faces $15bn hit over US green ad campaign
Volkswagen faces billions of dollars in potential new penalties after the top US consumer watchdog hit the carmaker with a lawsuit over its emissions cheating scandal.
The Federal Trade Commission is pursuing compensation for consumers that could rise beyond $15bn, according to a lawsuit filed on Tuesday seeking the repayment of “ill-gotten monies”.
The FTC alleges that VW systemically deceived customers over seven years with an advertising campaign promoting “clean diesel” vehicles that were in reality much dirtier than government rules permitted.
VW has admitted to equipping up to 11m diesel-powered cars around the world with software that tricked regulators by reducing nitrogen oxide emissions only when pollution tests were under way.
Six months since the scandal broke VW finds itself surrounded by hostile forces itching to punish it, ranging from the FTC and the US Department of Justice to the French government and German prosecutors.
Even before the FTC lawsuit UBS analysts were predicting the scandal would end up costing the carmaker €38bn, including €10bn in civil penalties and €9bn in criminal fines.
“It seems there is no light at the end of the tunnel so far,” said Ingo Speich, portfolio manager of Union Investment, a VW shareholder.
Edith Ramirez, FTC chairwoman, told the Financial Times: “From what we know the conduct here appears to be quite egregious.”
It relates to 550,000 vehicles sold since late 2008. If the FTC secured compensation equal to an average sale price of $28,000 for the vehicles — which would be consistent with past cases — it would add up to more than $15bn.
The case is due to be decided in a district court in San Francisco, but it could also be settled at a lower cost to VW if the FTC joins settlement talks already under way between the carmaker and other groups challenging it.
“We don’t know yet how this will resolve,” said Ms Ramirez. “There’s a possibility that we’re able to reach a resolution with VW that we believe will be enough to provide redress to consumers that were affected by this.”
“We’re going to want to make sure that however VW is able to address this — whether it’s through some kind of a buyback programme or through essential repairs to the affected vehicles — we want to make sure that consumers in fact get full compensation. That could extend beyond any buyback or repair.”
The FTC lawsuit lays out in excruciating detail how VW touted the greenness of vehicles that it said emitted 90 per cent less than traditional diesel cars, even though they had been rigged by engineers to be secret polluters.
Seeking to woo eco-conscious consumers, VW compared the environmental impact of driving the cars to riding a bike, arranged for the actress Gwyneth Paltrow to arrive in one at a Hollywood premiere, and peddled the slogan “Green has never felt so good”.
The lawsuit reveals that VW continued marketing 3 litre diesel engine cars as “clean diesel” while it was in discussions with the Environmental Protection Agency, which exposed the scandal, about cheating in its 2 litre models.
The lawsuit quotes one VW engineer saying the company had “not been caught” on its 3 litre models.
VW said in a statement: “Volkswagen has received the complaint and continues to co-operate with all relevant US regulators, including the [FTC]. Our most important priority is to find a solution to the diesel emissions matter and earn back the trust of our customers and dealers as we build a better company.”
The FTC’s move adds to a long list of legal challenges VW faces over the emissions scandal.
In January the Department of Justice filed a complaint over VW’s alleged violation of anti-pollution laws and in February a California court consolidated more than half a million cases from VW car owners alleging fraud.
In Europe the French authorities and German prosecutors are pursuing separate investigations into the scandal and the European Commission is pushing for compensation.
Institutional investors, who say the carmaker took too long to tell shareholders about its discussions with US regulators, are seeking damages in a Dutch court.
Rebecca Lindland, senior analyst for Kelley Blue Book, a car data service, said: “Every government agency that is even remotely impacted by this situation will sue to recoup what they consider damages to the agency’s constituents. There’s really no end in sight to this situation.”