Dieselgate Criminal Settlement Is A Fine Balancing Act
Now it’s down to simple math: how big will the criminal penalty be against Volkswagen for its self-inflicted emissions scandal? It is a balancing act between keeping the automaker in business while assessing a fine that will teach a lesson, said Automotive News Europe (ANE) Wednesday.
Working Quickly As Possible
Negotiators from the Justice Department and Volkswagen are working diligently to achieve a settlement before the administration change in January when President Obama completes his term. By completing the negotiation process and finding closure, the same players will be facing each other. If it goes longer, then the political team will change, reflecting the new administration.
Interestingly, the Justice people are not only working with VW, but they are also working with Deutsche Bank to settle a civil case. Some 320,000 German jobs could hang in the balance if the fines are too much and drive each business over the brink. Deutsche Bank is trying to settle civil charges that stem from the mortgage meltdown a decade ago.
At this time, it’s not clear what range of penalties will be applied in the criminal case against VW. The automaker had net liquidity of 28.8 billion euros -- $32.4 billion – as of June 30. Chief Financial Officer Frank Witter has a net cash figure of 20 billion euros to ensure VW’s funding needs and to protect its credit rating.
VW does have a regular influx of money quarterly due to car sales, and it also has access to a credit line to pay its debts. It could also raise capital to pay its obligations, said ANE.
Dieselgate Settlement Industry Record
So far, VW is paying an $16.5 billion to settle the civil fines already levied in the U.S. The fines, an industry record, were the result of admissions last year by the automaker that it had used a “defeat switch” to cheat on U.S. emissions tests of its diesel cars. The automaker knew that its vehicles couldn’t meet the standards and had implemented the “defeat switch” software routine as early as 2009. It continued the ruse until 2015.
VW is also facing investor lawsuits that may total as much as $9.2 billion in Germany. Germany is also conducting a criminal investigation.