Dieselgate Update: U.S. debating how large a fine Volkswagen can withstand

September 30, 2016

It might be hard to believe, but we're heading into the 13th month of the Volkswagen Dieselgate scandal. Is there light at the end of the tunnel for the beleaguered German automaker, or is that just an oncoming train? Judge for yourself in this week's Dieselgate update.

How much of a penalty can Volkswagen handle? Back in June, Volkswagen reached a massive, $15.4 billion settlement with U.S. regulators, which included funds for repairing and/or buying back 475,000 2.0-liter Audi and VW vehicles, plus some cash for environmental remediation, research, and such. But as huge as it was, the settlement won't make all of Volkswagen's problems go away. Still on the table: a fix for 85,000 3.0-liter Audi, Porsche, and VW vehicles and criminal penalties levied by the U.S. Justice Department over Volkswagen's illegally rigged diesel engines.

With Volkswagen having roughly $32.4 billion in liquid assets, there's little risk that the Department will run the automaker off the road. However, officials want the fine to be substantial enough that Volkswagen feels some pain. Both parties are working to resolve the issue before January, when another U.S. president will be sworn in, followed by a new horde of political appointees who could upend pending deals. Volkswagen may have the most to lose, though, because it clearly wants to put this matter to rest and focus all of its energies on selling cars to Americans.  

Volkswagen and Bosch don't want documents made public: Volkswagen and its alleged Dieselgate collaborator, Bosch, have turned over some 22 million pages of emails, memos, and other documents to those investigating their misdeeds. Investors and owners want a look at those docs, and they filed suits in Europe to get it, but judges there shot down the request.

And so, investors and owners have turned their attention to America, where the automaker is also being investigated. They've sued for the right to review the documents, but Volkswagen and Bosch are urging the judge to deny the request because the pages include sensitive information that could put them at a competitive disadvantage. Perhaps the kind of disadvantage they were trying to overcome by rigging 11 million diesels? Hey-ooo!

Audi engineering exec resigns: So far, Dieselgate hasn't done much harm to Audi--in fact, the brand's U.S. sales are up 3.5 percent for the year, which is far better than the 0.6 percent gains seen across automakers as a whole. However, reports suggest that Audi is intimately involved in the scandal, as its engineers designed the illegal defeat devices found on diesels way back in 1999.

Now, Audi's head of technical development, Stefan Knirsch, has mysteriously resigned, with no explanation. Are the "clean diesel" chickens finally coming home to roost?

Note: for purposes of clarity, "Volkswagen" has been used to refer to the Volkswagen Group parent company, while "VW" has been used to refer to the company's popular mass-market brand of automobiles.

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