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VW wrongfooted by US going public on emissions

2016-03-08 08:27

EMISSIONS SCANDAL: Embattled automaker Volkswagen believed it could clear up emissions-cheating allegations with US authorities amicably and was caught off-guard by them going public instead. Image: AP / Damian Dovarganes

Frankfurt, Germany - Embattled German automaker Volkswagen believed it could clear up emissions-cheating allegations with US authorities amicably and was caught off-guard by them going public instead, a key company document revealed on Monday.

According to the company's official written response to a lawsuit by German shareholders: "The public announcement of the diesel issue by the EPA (US Environment Protection Agency) ... came as a surprise for the VW management at the time."

A copy of the 113-page document, which offers an update on the facts compiled so far in VW's own investigation into the global scandal, was obtained by AFP.

It was drawn up by its lawyers as an initial statement of defence against accusations that it deliberately withheld market-sensitive information from investors.

VW, a former paragon of German industry with ambitions to become the world's biggest automaker, has been plunged into its deepest-ever crisis by revelations that it installed emissions-cheating software into 11 million diesel engines worldwide.

On top of still unquantifiable regulatory fines in a range of countries, VW is facing a slew of legal suits, notably in the United States and Germany, from angry car owners, as well as from shareholders seeking damages for the massive loss in the value of their shares since September.

They accuse VW of violating capital market disclosure rules, saying the carmaker knew about the irregularities long before the scandal broke and should have informed shareholders much earlier because they must have known it would affect the share price.

'Lawsuit without merit'

But according to the defence document, VW insists that the German shareholder lawsuits are "without merit" and that until "the violation of US environmental regulations was announced" on September 18, "there were no indications whatsoever of information with relevance for the stock price."

US authorities had never unilaterally decided to go public with similar accusations against other carmakers, VW argued.

On the contrary, even when allegations of potential violations of the US Clean Air Act had been made, normally an appropriate solution was found with the US authorities behind closed doors, it said.

"In the past, even in the case of so-called 'defeat device' infringements, a settlement was reached with other carmakers involving a manageable fine without the breach being made public," VW argued.

"And in this case, the employees of Volkswagen of America had the impression on the basis of constructive talks with the EPA that the diesel issue would not be made public unilaterally but that negotiations would continue," the document stated.

At that stage in September 2015, the negotiations between VW's American subsidiary and the US authorities had already been going on for more than a year.

VW's lawyers also sought to exonerate the group's management in the affair, including former chief executive Martin Winterkorn and other board members, including current supervisory board chief Hans Dieter Poetsch.

It conceded that discussions had been held and memos exchanged at top management level, but the issue was simply one of a number other issues for board members.

In the summer of 2015, Winterkorn ordered an investigation into the matter, but "individual technicians attempted to stonewall these internal reconnaissance efforts."

VW has insisted from the very beginning that a small group of engineers was behind the scam.

The automaker has begun making the necessary technical adjustments to the affected engines in Europe, but not yet in the United States where the necessary discussions are still ongoing.


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