There’s Trouble In Motor City

DieselGate #1: Volkswagen’s Final Solution

Regulators and consumers may be mad at Volkswagen for lies about nitrogen oxide emissions, but auto industry execs are frantic: VW’s Final Solution has uncorked the industry’s worst nightmare: having to personally do time for deception of consumers and regulators.

Auto industry prevarications are nothing new. The industry repeatedly pushes the envelopes about performance, gas mileage, safety and pollution. VW’s deception could be a game changer: a dangerous new precedent that expands executive accountability for falsehoods.

Six years ago VW claimed it had a “clean” diesel engine. Problem: it was dirty because it emitted nitrogen oxides way above allowable levels. VW had a lie in need of a cover-up. VW’s Final Solution was to secretly insert software that turned off nitrogen oxide reporting when its diesels were monitored for emissions. The scheme worked for six years until a small lab accidentally stumbled onto it. Hundreds of thousands of the dirty diesels have been sold in the USA, 11 million worldwide.

Until now, American regulation of the industry was by the National Highway Transportation Safety Agency. NHTSA fines are capped at $34 million, the amount recently paid by General Motors for non-disclosure of defect info that may have contributed to126 fatalities in crashes.

These VW’s lies engaged the Environmental Protection Agency and the Department of Justice. The EPA will seek fines of $37,500 for each car sold in America. According to The New York Times, the VW penalties might reach $19 billion. VW has already set aside $7.4 billion for what is down the road.

What troubles auto executives even more is the Department of Justice’s new direction. Since it cannot jail corporations, the DofJ will seek jail time for executives responsible for harming large numbers of consumers. VW is the perfect first target. Others may follow.

So auto industry execs are asking themselves “What did I know and when did I know about any phony stuff we claimed?” If the DofJ successfully sends VW execs to the pokey, a legal precedent will create nightmares for them about slow room service at minimum-security prisons.

 Part 2 of DieselGate will have suggestions for compensation of American owners of VW diesels. Note: Thanks to the New York Times and The Financial Times for their continual coverage of the VW diesel scandal.




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