U.S. Pondering a Criminal Fine That Stops Just Short of Killing Volkswagen: Report

Steph Willems
by Steph Willems
u s pondering a criminal fine that stops just short of killing volkswagen report

How much can we chop away while keeping the body alive?

The U.S. Justice Department’s plans for Volkswagen’s criminal fine is like a horror movie, only with corporate finances playing the role of a writhing human subject.

According to two sources close to the negotiations, the DOJ wants to extract as much monetary lifeblood from the automaker as possible, while keeping the company afloat, Bloomberg reports.

Volkswagen has already spent about $16.5 billion in the U.S. to settle the consumer and environmental fallout from its emissions-cheating 2.0-liter TDI models. Another settlement (and possible buyback) looms for its 3.0-liter models.

Overseas, the remainder of the roughly 11 million sidelined diesel models require a recall, while class action lawsuits are sprouting like a newly seeded lawn. Investor lawsuits filed in Germany are fast approaching $10 billion, and the German government could also level a criminal fine. Coupled with a sales slide in many markets, the emissions scandal has Volkswagen reeling. The DOJ must figure out a penalty that hurts, but doesn’t leave the automaker spiraling into bankruptcy.

According to Bloomberg, the DOJ wants a deal with Volkswagen by January, before the next administration arrives. If it takes too long, new appointees will replace the people working on the file.

The size of the fine isn’t yet known. Volkswagen’s chief financial officer has stated he wants the company’s average net liquidity to remain stable at about $22.5 billion (20 billion euros) to cover costs and maintain its credit standing. If needed, the company could raise extra cash through a line of credit or asset sale.

Volkswagen continues to make money, meaning it could pay the penalty in installments while still keeping 610,000 employees on the payroll.

[Image: Frankieleon/ Flickr]

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  • RobertRyan RobertRyan on Sep 27, 2016

    @markogts Best post here. If you act like the Mafia, you will be treated like them.

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    • Scoutdude Scoutdude on Sep 27, 2016

      @Scoutdude Again that has absolutely nothing to do with the mess VW created for itself. Keep in mind the US is not the only country that they cheated in and not the only country looking to extract penalties out of VW.

  • NeilM NeilM on Sep 27, 2016

    And here's a perfect illustration of the problem: VW's shareholders, and indirectly its ordinary employees, take the hit from fines, penalties and the cost of remedial measures. Meanwhile those who committed the actual offense get what, some public shaming and maybe lose their jobs? Oh, and the opportunity to claim that it wasn't their idea and that they were only obeying orders. This is the classic "Search for the guilty, punishment of the innocent." Well I have another view of what should be done. Following the 1757 execution of Admiral Byng in Britain for dereliction of duty, Voltaire wrote in his novella Candide that "In this country it is good to kill an admiral from time to time, in order to encourage the others." Until some of these corporate weasels suffer some actual punishment for their misdeeds, there's not much encouragement for the others to toe the line. Neil

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    • RobertRyan RobertRyan on Sep 28, 2016

      @DC Bruce Yes much better idea. Get the Corporate types who started the mess. Problem is not much of a track record of that in the US. How many people who started the Rubber Loans, that triggered the GFC are behind bars?