CBS Money Watch released an article in October describing the cost of what could become the most costly scandal in decades for an auto maker. An analyst at Warburg Research said the deception could end up costing Volkswagen around $35 billion once recalls, fines, legal fees and stockholder retaliation is said and done, estimated to be around 2017. This is approximately two-thirds of Volkswagen’s market value. Ouch.
A couple of weeks ago, we discussed exactly what Volkswagen did wrong regarding it’s intentional cover up of vehicle software, which allowed certain diesel vehicles to essentially lie during emissions tests. When emissions went back to normal, they turned out being 30-40 times higher than legal limits. According to various news sources, Volkswagen will be forced to recall somewhere in the area of 11 million vehicles worldwide. However, it was uncertain at the time what types of fines and fees the auto giant would face.
Although the United States only houses about 500,000 of those vehicles, the U.S. Environmental Protection Agency (EPA) is showing no mercy and has threatened it will fine Volkswagen up to $18 billion. As of last month, Volkswagen announced it would set aside $7.3 billion to deal with recalls and fines. Clearly the company needs to reassess and dig deeper into the piggy bank.
Former Volkswagen CEO Martin Winterkorn was replaced on September 25 by Matthias Mueller – previous head of VW’s Porsche brand. Although he remains optimistic that the company will make a full recovery from the cataclysmic scandal, he acknowledges that it will not come free of pain. Obviously the company will need to make severe sacrifices, which will surely affect stockholders, employees, customers and executives.
Some analysts fear there will be much wider consequences. They believe the impeccable reputation of German automakers may be forever tarnished, leading to worldwide drops in stock prices and reassessments of diesel technology. The idea that diesel may not actually be as clean as we once thought is now passing through the minds of drivers and policy makers all over the world. The United States in particular has seen a drop in diesel interest since the popularity of hybrid and electric vehicles began to rise last decade. Now, this trend could potentially see rise in the rest of the world, which would be beneficial to the United States.
Regardless of future industry trends, we can be sure that Volkswagen will struggle greatly in the next few years. Thousands of Volkswagen diesel owners in the US have yet to recall their vehicles, and have been told this may take up to a year. Are you one of those owners? Contact the Chicago law offices of Baizer Kolar P.C. to find out what you are entitled to and how we can help.