The United States Department of Justice on Tuesday filed suit against Volkswagen on behalf of the Environmental Protection Agency. The suit claims the company sold almost a half million diesel powered cars in America starting in 2007 knowing they did not meet federal emissions standards. Volkswagen has already admitted it did precisely that. The only question now is, what should the penalty be?
“The United States will pursue all appropriate remedies against Volkswagen to redress the violations of our nation’s clean air laws. Car manufacturers that fail to properly certify their cars and that defeat emission control systems breach the public trust, endanger public health and disadvantage competitors,” said Assistant Attorney General John Cruden, head of the Justice Department’s environment and natural resources division.
Under US law, Volkswagen could face up to $48 billion in fines, an amount that would effectively bankrupt the company. Not surprisingly, VW’s new CEO, Matthias Mueller, is in the US at the moment. According to Reuters, after visiting the Detroit Auto Show next week, he is expected to meet with representatives of the EPA and then attempt to charm political leaders in Washington.
This week, Herbert Diess, the new president of Volkswagen, also happens to be in America. He introduced the company’s newest electric vehicle, the BUDD-e, at the Consumer Electronics Show in Las Vegas on Tuesday. No doubt he will accompany Mueller on his rounds and smile optimistically in the background.
There is no doubt that the diesel cheating scandal has international implications. The government of Germany has begun muttering darkly that severely punishing Volkswagen could cripple a company that employs almost a quarter of a million Germans. Conventional wisdom has it that each job in the industry creates three more in manufacturing and services that support the industry.
Volkswagen sold far more of its non-compliant cars in Europe than it did in America. Worldwide, almost 11 million vehicles are involved. Yet authorities in Europe seem to be satisfied with the proposals the company has offered to make amends for its actions. Here in the United States, the prevailing notion is that the company must be brought to its knees and made to bleed in order to compensate for its sins.
The VW cheating scandal first broke only 4 months ago, but already the minions of the law have marshaled their forces to exact legal retribution. Bear in mind this is the very same Justice Department that has yet to prosecute one single person for the massive Wall Street cheating scandal that destroyed the international monetary system, wiped out trillions of dollars in wealth, and bankrupted millions of Americans 6 years ago. Some say the phrase “Justice Department” is an oxymoron.
In the meantime, an uncontrolled methane leak near Los Angeles has already pumped more toxic emissions into the atmosphere in a few months than all those Volkswagen diesel engines did in 7 years.
How will all this get resolved? Elon Musk and 44 other senior Silicon Valley executives have weighed in with a proposal that says fining Volkswagen will serve no practical purpose. In an odd twist in the arcane word of commerce, Musk actually wants officials to force VW to compete with his company, Tesla Motors. He says any monetary penalties should be used to require Volkswagen to make more and better electric cars. That way, the world can finally begin to wean itself from its self destructive fossil fuel habit. The Sierra Club and a group of environmentalists have responded by demanding Volkswagen be prosecuted to the full extent of the law.
What happens next is anybody’s guess. 14 years ago, the U.S. sued Toyota for environmental violations that could have brought fines totaling $58 billion. The suit was ultimately settled for a paltry $34 million. Mueller and Diess are hoping their presence in the US in the coming weeks will lead to a similarly favorable result, so Volkswagen can get on with the business of selling its cars to the masses.