Ghosts Of Dieselgate: VW Loses Important Case in Germany

Matt Posky
by Matt Posky

Volkswagen’s emission-related malfeasance was promptly identified and dealt with in the United States. The company was accused of using suspect software to game testing scores on diesel-equipped models in 2015. By October of 2016, VW was on the hook for a $15.6 billion financial penalty, in addition to mandatory fixes or buybacks on affected vehicles.

Things progressed differently on the European front. Germany has subjected the manufacturer to numerous investigations, ultimately deciding to fine the firm $1.18 billion in 2018 and enact widespread recalls. Civil suits have largely focused on VW’s legal representatives denying the software had any ill intent, claiming it was simply code that mistakenly allowed the cars to become non-compliant with regulatory limits. This didn’t fly, however, with a gigantic UK lawsuit finding the automaker guilty of intentionally misleading customers in April.

This week, VW lost another important legal battle in Germany when the Bundesgerichtshof found it guilty of cheating on emissions testing years earlier. The Federal Court of Justice in Karlsruhe decided disenfranchised diesel van owner Herbert Gilbert was entitled to a €28,000 payday, setting a precedent for thousands of other claimants seeking revenge.

In combination with the outcome of the UK suit, Volkswagen Group is staring down tens of thousands of people that can now point to two rulings that pin the scales of justice squarely in their favor. However, the Financial Times suggests that delaying important court decisions in Europe has played out better for the automaker than one might assume:

The precedent will de facto force VW to compensate claimants in at least 50,000 outstanding cases.

However, the world’s largest carmaker has largely mitigated the risk of a worst-case scenario.

Last month, it reached a settlement with 240,000 drivers in Germany, who had sued VW in the country’s largest collective lawsuit. They will receive between €1,350 and €6,250 each, as part of a €750 [million] payout.

In 2015, the German group was forced to recall more than 11 [million] cars worldwide after it was revealed that its EA189 diesel engines contained software that manipulated the results of pollution tests.

By delaying one lawsuit while settling another, VW likely reduced the amount it would have been forced to pay by a sizable margin. This also bought it loads of time to prepare for subsequent financial hits, as the brunt of its penance is being funneled into the United States. While this may lead you to think the U.S. got the sweeter deal, that may only be true in the short term.

The European Union is currently investigating whether or not diesel engines manufactured by several large brands (including VW) qualified as “defeat devices” in the eyes of the law. If it decides that is the case, Volkswagen and friends would only be witnessing the beginning of mass payouts to government entities and consumers. The UK lawsuit (which incorporates around 90,000 claimants of its own) has also yet to be finalized, something VW was quick to mention after its initial ruling in April.

“The judgment relates only to preliminary issues [and] does not determine liability or any issues of causation or loss for any of the causes of action claimed. These remain to be determined by the court as the case continues,” a spokesman said at the time. “Volkswagen remains confident in our case that we are not liable to the claimants as alleged and the claimants did not suffer any loss. We will continue to defend our position robustly. Nothing in this decision today changes this.”

While few outside the company are willing to defend VW’s actions, some claim they’re the direct result of government intervention that spurred the development and adoption of diesel vehicles decade earlier. The EU saw diesel engines’ lower CO2 output as beneficial to the environment in the late 1990s and began subsiding their fuel. In 2012, the World Health Organization released a scathing report targetting diesel-related NOX emissions and the continent slowly soured on the fuel as focus shifted toward electric vehicles.

Critics now say that Europe put automakers in an impossible situation. Increasingly stringent emission rules are forcing brands to dump cash into EVs while simultaneously failing to meet regulatory targets. Customers are simultaneously not buying ultra-efficient models in numbers that would consistently validate their existence, creating a scenario where an industry that’s probably not great for the environment anyway has to build cars not that many people want to buy. The planned banning of diesel-powered autos in many regions has also made them less desirable, hindering some automakers’ ability to do business as normal — including VW, which now frames itself as a forward-thinking “mobility brand.”

But does this merit clemency to firms that have operated outside the confines of regulatory law? If you’ve ever put a tune on your automobile, odds are good you don’t care one whit about VW products conning emission testers into thinking they’re above board in order to covertly make additional power the rest of the time. But the rest of the world is going to want to hold manufacturers accountable for fibbing — and needs to, if the rules are to hold any importance. This writer certainly doesn’t think VW should be let off the hook for misleading people, though some additional time should perhaps be spent examining why the company felt it necessary to cheat in the first place. After all, it hasn’t been an isolated problem, and seems a direct response to evolving regulatory mandates or an industry-wide assumption that they need to be circumvented.

[Image: Gyuszko-Photo/Shutterstock]

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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  • Pwrwrench Pwrwrench on May 27, 2020

    "in order to covertly make additional power the rest of the time" I could be wrong on this, but IIRC one of the big selling points that VW had was the reduced fuel consumption that their TDI engines had. When the engines were reconfigured to meet the emission regs the fuel consumption became similar to other diesels. It was also less expensive as VW did not use the fluid injection into the exhaust. Again that system is needed to meet the emission regs. More knowledgeable people can feel free to correct my ideas.

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