Ethics Update: Volkswagen Scandal EscalatesBy
A preliminary agreement in the United States has resulted in Volkswagen (VW) including $18 billion in its 2015 results, covering the cost of offering buybacks, compensation, and repairs to U.S. owners of most affected vehicles. Final agreement is set for June 21, 2016. Currently not covered are expected costs resulting from potentially huge penalties and fines having to do with investor claims and the 90,000 cars with large three-liter engines.
The U.S. agreement has resulted in global criticism. The U.S. environmental organization Sierra Club published a statement that noted, “Without strict penalties, and without fixing or removing the polluting vehicles, people will continue to breathe dirtier air, consumers will lose faith in watchdog agencies, and manufacturers will believe they can endanger our health without feeling the full consequence.”
Concurrently, a European crackdown on emissions problems has resulted in a voluntary recall of 630,000 Mercedes-Benz, Audi, Porsche, Opel, and VW diesels to repair engine-control software. In London, a plaintiff’s law firm asked, “Why are vehicle owners in the UK being treated differently? The majority of our clients chose their car because of its environmental credentials. They are angry that they have been lied to.” See also “The Volkswagen Problem” in the February 2016 Strategic Finance as well as the recent April 2016 update.