Ein Problem: Volkswagen Facing $10.7 Billion Investor Lawsuit Over Diesel Scandal

Matt Posky
by Matt Posky

Volkswagen Group will be staring down the barrel of a courtroom next week, which isn’t anything new. The automaker’s investors want 9.2 billion euros ($10.7 billion) in compensation after arguing the carmaker should have informed shareholders about a diesel emission scandal before regulators got the word out in 2015.

The lawsuit groups 1,668 individual claims, primarily those brought in by VW’s institutional shareholders, who previously accused the automaker of failing to inform investors about the scope of a scandal. Volkswagen’s excuse has always been that top brass had no idea the issue would be serious enough to cost the company 27.4 billion euros in punitive fines. But new evidence continues to emerge that upper management was well aware of the defeat devices’ existence.

Shareholders claim that, if Volkswagen opened up early on the problem, they could have limited the losses stemming from the scandal. Instead, the Environmental Protection Agency blew the whistle in September of 2015 and VW shares plummeted as details emerged. Reuters estimates that shares dropped 37 percent in value within the first few days following the EPA’s announcement. That valuation would continue to fall sharply for the remainder of the month.

Volkswagen has since admitted to emissions cheating and accepted its penance, but continues to deny any wrongdoing as far as the regulatory disclosure is concerned. The company has remained steadfast in its assertion that board members, including Volkswagen’s current chief executive Herbert Diess and chairman Hans Dieter Poetsch, have not violated any official disclosure rules.

“Neither the management board nor individual board members caused or were involved with the compliance violation in the United States,” VW’s court filing said.

The trial is scheduled to begin on Monday in Braunschweig, Germany — near VW’s Wolfsburg headquarters. Presiding Judge Christian Jaede will be running the show.

Because Germany doesn’t allow U.S.-style class-action lawsuits, the case, brought by Deka Investment GmbH, will serve as a proof for future litigation. The Wall Street Journal reports that the outcome would serve to inform the rulings on the multitude of pending lawsuits seeking $10.7 billion in damages. It also claimed that a victory for shareholders was far from certain, as it is not common practice for German courts to grand such large awards for damages in civil litigation cases.

[Image: Volkswagen]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Johnny ro Johnny ro on Sep 07, 2018

    Shareholder lawsuits are weird. The suit is on behalf of shareholders, who bear the profits and losses of VAG. Lets pretend they win their $10b. Where does it come from? From VAG shareholder equity. A forced dividend, paid out by current shareholders to the 2015 shareholders? Wonder if German lawyers will take the top 30% of the settlement?

    • Jpolicke Jpolicke on Sep 08, 2018

      This occurred to me as well. If you're suing a company you own a part of, you're hurting your own investment. Kind of like suing your spouse for damaging your shared car that was fixed with money from your joint account. Now, if they went after Winterkorn, Piech, et al, personally, that would be worthwhile. Strip 'em down to the shorts.

  • Iddqd Iddqd on Sep 08, 2018

    as a german i know a bit more, so here it is: one memo-styled letter appeared, written by some mid-level manager of VW at then CEO Winterkorn, informing him of the potentiality of a possible lawsuit in the US months before the CEO took any `action`- if you want to call it that. This mid-level manager stands by his word and the rest is to be decided..

  • ToolGuy First picture: I realize that opinions vary on the height of modern trucks, but that entry door on the building is 80 inches tall and hits just below the headlights. Does anyone really believe this is reasonable?Second picture: I do not believe that is a good parking spot to be able to access the bed storage. More specifically, how do you plan to unload topsoil with the truck parked like that? Maybe you kids are taller than me.
  • ToolGuy The other day I attempted to check the engine oil in one of my old embarrassing vehicles and I guess the red shop towel I used wasn't genuine Snap-on (lots of counterfeits floating around) plus my driveway isn't completely level and long story short, the engine seized 3 minutes later.No more used cars for me, and nothing but dealer service from here on in (the journalists were right).
  • Doughboy Wow, Merc knocks it out of the park with their naming convention… again. /s
  • Doughboy I’ve seen car bras before, but never car beards. ZZ Top would be proud.
  • Bkojote Allright, actual person who knows trucks here, the article gets it a bit wrong.First off, the Maverick is not at all comparable to a Tacoma just because they're both Hybrids. Or lemme be blunt, the butch-est non-hybrid Maverick Tremor is suitable for 2/10 difficulty trails, a Trailhunter is for about 5/10 or maybe 6/10, just about the upper end of any stock vehicle you're buying from the factory. Aside from a Sasquatch Bronco or Rubicon Jeep Wrangler you're looking at something you're towing back if you want more capability (or perhaps something you /wish/ you were towing back.)Now, where the real world difference should play out is on the trail, where a lot of low speed crawling usually saps efficiency, especially when loaded to the gills. Real world MPG from a 4Runner is about 12-13mpg, So if this loaded-with-overlander-catalog Trailhunter is still pulling in the 20's - or even 18-19, that's a massive improvement.