Volkswagen will seek damages from a former CEO, as well as the one-time head of the Audi brand, holding them responsible for the diesel emissions scandal that so far has cost it $38 billion while also sullying the company’s global reputation.
The claims stem from a lengthy internal investigation that concluded both former Chief Executive Officer Martin Winterkorn and one-time Audi boss Rupert Stadler breached their responsibilities leading up to the fiasco. Since the subterfuge was revealed in September 2015, VW and its various, affiliated brands have had to repair or repurchase millions of vehicles and pay billions in fines in the U.S. and other markets.
In what VW described Friday as “by far the most comprehensive and complex investigation carried out in a company in German economic history,” it was concluded that Winterkorn ““breached his duties of care … by failing, in the period from 27 July 2015 on, to comprehensively and promptly clarify the circumstances behind the use of unlawful software functions” in a number of different vehicles.
Defeat devices
The scandal was triggered when tests of diesel-powered Volkswagen models showed them producing significantly more harmful emissions than allowed under U.S. regulations. The automaker previously self-certified the products claiming they complied with emissions rules. It turned out VW engineers developed a way for those vehicles to detect when they were being tested and then reduce emissions levels using a so-called “defeat device.”
A probe by the U.S. EPA further revealed the technology was also used to let diesel-powered Audi and Porsche products illegally pass emissions tests. Subsequent studies showed the various brands rigged emissions tests in Europe and other markets, as well.
In April 2017, Volkswagen agreed to pay the largest fine ever levied against an automaker in the U.S. The $2.8 billion agreement was part of a plethora of settlements. Among other things, VW agreed to buy back as many as 500,000 vehicles while repairing others equipped with the faulty engines. As part of its various agreements, the German automaker also set up a new company, Electrify America, to help promote the sale of zero-emission vehicles and to set up a nationwide network of EV charging stations.
Most costly scandal in automotive history
All told, the company has so far spent more than 32 billion euros, or about $38 billion due to the scandal. It is widely seen as the most expensive scandal ever in the auto industry.
The case also saw criminal investigations launched in the U.S. and Europe. Two mid-level VW executives based in the U.S. were subsequently arrested and tried in the scandal. Oliver Schmidt was extradited to Germany which released him in January after serving about half his original sentence.
A number of other VW employees charged by U.S. prosecutors fled to Germany before they could be arrested. That country does not have an extradition treaty with the U.S. covering the allegations.
Winterkorn, Stadler also facing criminal prosecution
German prosecutors did, however, take action on their own against some former company officials. Stadler, for one, was arrested and spent months in jail as an investigation ramped up. Winterkorn also was charged. A court in Braunschweig dropped some charges in January and a trial on others has been postponed until September due to the coronavirus pandemic.
“The current situation and the development of the COVID-19 pandemic … make the postponement of the start of the main proceedings to a later date this year seem appropriate,” the court said in a statement on Wednesday.
Winterkorn pleaded not guilty and his lawyers today rejected VW’s demand for damages. They issued a statement saying the former CEO “is aware that the supervisory board is obliged to assess potential claims and to possibly assert them. He will therefore seek to clarify those questions in consultation with Volkswagen AG.”
The micromanager
For years, VW relied heavily on its diesel technology to gain an edge on competitors. Known as a micromanager, some of those familiar with Winterkorn questioned how he would not have known about the problems the company faced bringing its diesels into legal compliance with emissions laws.
Winterkorn resigned Sept. 23, 2015, a week after the scandal broke. Once he was linked to the scandal, VW terminated Stadler’s contract, as well.
Stadler recently went on trial for his role. The case is expected to drag on through 2022, according to German news reports.
VW said its decision to seek damages against the two executives follows an investigation by the law firm Gleiss Lutz. A total of 1.6 million files were reviewed, with the investigating team conducting more than 1,500 interviews. Additional damage claims will be made against former lower-level VW managers, the company said Friday.
