(This story has been updated to reflect new details provided during a Feinberg news conference.)
Volkswagen is setting up an independent claims fund to address its diesel emissions scandal, and it has tapped attorney Kenneth Feinberg to handle the program.
Feinberg recently wrapped up work for General Motors where he oversaw a similar fund for claims on behalf of victims impacted by a General Motors ignition switch defect. Feinberg also oversaw compensation funds following the 9/11 attack on the World Trade Center and the BP oil spill in the Gulf of Mexico.
“His extensive experience in handling such complex matters will help to guide us as we move forward to make things right with our customers,” said Michael Horn, President and CEO, Volkswagen Group of America.
(VW’s global sales, share weaken in wake of diesel scandal. Click Here for the story.)
Volkswagen has admitted cheating on emissions tests involving its 2.0-liter turbodiesel by using a so-called “defeat device” to significantly reduce pollution when the vehicle determined it was undergoing testing. It has separately acknowledged using illegal hardware in its 3.0-liter diesel models. All told, more than 500,000 sold in the U.S. were impacted by the subterfuge.
The maker has since been hit with over 450 separate lawsuits filed on behalf of vehicle owners, shareholders and dealers. Most of those legal actions will be consolidated and heard by a federal judge in San Francisco. All told, the German automaker will have to defend itself against claims that could push into the billions of dollars.
VW has already taken steps to try to assuage U.S. customers. It is offering owners of vehicles equipped with the 2.0-liter diesel $1,000 in gift cards and credits at its dealerships.
The maker has not said specifically what sort of payout it will offer through the new fund, and it is likely to take “60 to 90 days” to figure out what compensation might be offered to those owners impacted by VW’s cheating. Feinberg said he was not yet ready to decide if that might go beyond cash and even include buybacks or replacement vehicles.
Feinberg said he and his team plan to meet with owners, lawyers and regulators to come up with the protocols for the program.
He stressed that ” “It’s clear to me…what we can say is that Volkswagen is taking a very serious approach to satisfying its customers.”
(VW planning to show “completely new” battery-car at CES show next month. Click Here for details.)
In case involving the defective General Motors tignition switch, Feinberg’s team used well-accepted actuarial tables to determine appropriate payouts. Ultimately, offers were made to about 400 claimants, only two of which had not yet accepted as of last week. The total bill to General Motors came to nearly $600 million.
It could be more of a challenge coming up with a fair payout to those impacted by the VW scandal, in part, because the maker is facing a variety of different issues. The lawsuits so far filed against the German maker cover a diverse range of claims, including reduced trade-in values, a sharp drop in the company’s stock price, and the loss of business for Volkswagen dealers. Feinberg’s compensation fund will only handle consumer claims.
His chief assistant, Camille Biros, estimated about 500,000 owners of VW diesel vehicles might participate, making it one of the larger groups Feinberg and his team have handled. The well-respect compensation specialist was able to work with an estimated 97% of qualified 9/11 victims and families, 92% of those eligible in the BP spill, and 93% of the GM ignition switch victims. Feinberg said he is hoping to do equally well in the VW case.
“We have a high bar to meet if we are to be successful,” he said, but the goal is to get as many victims taken care of as possible and move them out of the courtroom.
By some estimates, VW may eventually have to spend over $50 billion to put the diesel emissions scandal behind it. There are additional lawsuits overseas. The maker could face $18 billion in EPA fines over the 2.0-liter diesel rigging alone. And the U.S. Justice Department could seek additional penalties to settle its ongoing criminal probe.
VW has so far set aside more than $7 billion to cover costs, while also lining up $20 in credit from a consortium of banks. It has, meanwhile, made sharp cuts in spending plans and delayed or eliminated a variety of projects.
It also has made a number of key personnel changes, starting with the ouster of former CEO Martin Winterkorn, along with the R&D chiefs at the VW and Audi brands. On Wednesday, VW rehired one-time senior engineer Uli Eichhorn to be the company’s new head of research and development. He left VW in 2012 to head an automotive industry consortium in Germany.
Separately, new VW CEO Matthias Mueller has rejiggered his upper-level management structure, cutting by half the number of direct reports he oversees, to “speed up the decision-making process, reduce complexity and increase efficiency,” he said in a statement.
That move should help avoid a repeat of the diesel dilemma which, Mueller previously said, was the result of a “whole chain” of mistakes and a corporate system that turned a blind eye to cheating.
(VW report blames small group for diesel cheating. Click Here for the maker’s interim internal report.)
One response to “VW Hires Victim Compensation Expert Ken Feinberg”
OK, so exactly who has a legitimate claim against VW for damages other than someone who has traded their diesel powered vehicle since the scandal was reported and received less than fair market value for their vehicle? Since VW is updating the software so that all diesel powered VWs are compliant around the world, where is the damage or loss? VW owners in the U.S. have actually enjoyed slightly better mpg than what the EPA test cycle lists, so they haven’t been hurt on fuel economy. With the software update they should still achieve the EPA rated or better mpg, so where’s the claim for damages?
No one has been physically hurt from the minor emissions violation which effectively amounts to the equivalent of “jay walking”, yet the EPA and media have blown this trivial matter so out of proportion that you’d think VW was an axe murder. Compare the trivial VW exhaust emissions issue to the GM 100+ deaths due to a defective ignition switch and reported internal cover-up. There is no evidence of any intent by VW management to orchestrate the installation of illegal software or to conceal it once the EPA brought it to their attention. In fact VW has gone out of it’s way to cooperate with all government agencies around the world in the diesel scandal. VW has also hired two private investigation teams to get to the bottom of who is responsible for the illegal software – which has harmed no one, but is in fact illegal.
I’m sure U.S. jackpot justice will prevail in many cases if the courts do not stop this insanity. The EPA has already backed itself into a corner with allegations on the 3.0L V-6 diesel that conflict with the EPA’s own definition of a “defeat device”. Independent authorities have extensively investigated the VW/Audi/Porsche 3.0L v-6 diesel engine and found it to not violate emissions regs.
We’ll see if justice prevails or if the gold diggers in the U.S. will continue to profit from violation of the judicial system as has been the case for many years. As the Toby Keith song says: “Spill a cup of coffee, become a millionaire”. A reputable judge would likely toss about 90% or more of the bogus class action lawsuits except in the US. where lawyers become millionaires from false and irrational claims against anyone of financial means.