Volkswagen’s Nightmare: No ‘Fix’, A Legal Apocalypse And A Busted Future

While Volkswagen has said that it will recall “and repair” the 11 million cars fitted with the fraudulent ‘defeat device’, it is highly likely that there is no possible repair.

What is it proposing to do? Re-engineer all 11 million cars so that they comply with the emissions claims?

And it will do this while maintaining the performance outputs and driving characteristics that induced customers to choose a Volkswagen product over competing products?

Is the latter even possible?

If it were not complicated, extremely difficult, or perhaps impossible, to replicate the fraudulent emissions results on road, to achieve the stated claims on emissions without seriously ‘nobbling’ performance outputs, Volkswagen would not have put so much at risk to manipulate results, to hoodwink regulators, and to then market its vehicles globally under the banner-claims of this deceit.

It is in fact highly likely – certain, you would have to think – that the dodgy emissions result can only be replicated in a manipulated ‘test environment’. And that the affected cars cannot “be repaired”.

So what will a fix do? It will certainly involve the removal of the software that produced the dodgy result, but that action, of course, will not alter the ‘actual’ emissions performance of the affected cars.

And they will remain ‘dirtier diesels’ than the cars customers thought they had bought, and were enticed to buy through Volkswagen’s advertised claims.

Which then leaves Volkswagen with the legal problem of ‘making good’: of satisfying customers who bought these products in good faith and upon the basis of stated claims as to their emissions performance.

Which is why so many plaintiff lawyers (including Maurice Blackburn Lawyers in Australia) are lining up around the world to prosecute class actions on behalf of disaffected customers.

A global legal onslaught

Then there is the world-wide legal mess of the deceptive conduct and compliance offences.

The company and its directors will likely face criminal prosecution and enforcement actions in Germany, France, the UK, the USA, Australia – and others, among numerous jurisdictions – for the planned, deliberate, fraudulent conduct it has admitted to engaging in to deceive regulators and to give the finger to the environmental compliance laws and regulatory regimes operating within those jurisdictions.

That deception is serious, and, while it will take years to play out, the Volkswagen Group is facing a legal onslaught. From everywhere.

This, as everyone now realises, will have the VAG board trembling to its boot-straps.

At its worst, it is potentially life-threatening for the company

Implications for the Australian arms of VW, Audi and Skoda

In Australia, the local arms of Volkswagen, Audi, Skoda and its franchised dealer network have most certainly been as surprised, perplexed and angered by the revelation of the deception as has the rest of us.

The withdrawal from sale of the affected products shows the seriousness of the problem it has on its hands here.

Though the deception was engineered elsewhere, these brands have, among other likely environmental and consumer compliance offences (the latter which will involve the ACCC), vicariously fallen foul of the Australian Motor Vehicle Standards Act 1989.

This Act is administrated by the Federal Department of Infrastructure and Regional Development (formerly the Department of Infrastructure and Transport).

An abstract of the workings of the Act (the National Compliance Strategy) can be found HERE.

The Act is regularly updated to “remain relevant to changing standards, technologies and community expectations of safety, environmental performance and consumer law”. (Introduction: National Compliance Strategy)

The latter, of course, involves the ACCC. There is a direct line of advice to the ACCC from the Department of Infrastructure in particular involving matters of vehicle recalls, vehicle safety, and other matters of consumer interest.

There is also the sanction of “legal actions such as setting of conditions; variation, suspension, cancellation or refusal of approvals; and criminal penalties” for non-compliance.

Certain to be concentrating minds within Volkswagen Australia is the following item under 2.1.4 Enforcement (National Compliance Strategy):

2.1.4.6 Prosecution

“If non-compliance is identified as intentional and the Department has sufficient evidence to support a prosecution, the matter would be referred to the Director of Public Prosecution for consideration. “If the Department becomes aware of evidence suggesting significant intentional non-compliance, the matter would be referred to law enforcement for consideration and investigation. “If the Department becomes aware of evidence suggesting non-compliance in relation to the importation of vehicles, the matter would be referred to Customs and Border Protection for consideration of joint action.”

Also certain to be concentrating minds is the attention of the ACCC and the heavy artillery at its disposal.

In a statement, ACCC Chairman Rod Simms said, “First, using defeat devices is specifically prohibited under the Australian Design Rules, which are picked up as Australian Consumer Law (ACL) mandatory safety standards.”

“As the enforcer of the ACL, the ACCC can take action against any corporation that has breached mandatory standards,” Mr Sims said. “Businesses must be able to substantiate any claims they make. The ACCC will be seeking marketing materials from VW Group and will not hesitate to take action if consumers were exposed to false, misleading or deceptive representations,” Mr Sims said.

And this is just Australia.

An apocalypse for VAG

Globally, the headache for VAG is of monumental proportions.

In the truest sense of the word, this is an apocalypse for Volkswagen. It has set aside a war-chest of some US$10billion for rectification and compensation, but its war chest won’t nearly be big enough.

The US$60billion GM needed to save itself from collapse at the onset of the Global Financial Crisis will be small beans compared to what VAG will likely need to drag itself out of the global compliance and consumer legal maelstrom it has rowed itself into.

The exposure of its deception has lifted a veil on the company that many had believed an exemplary corporate citizen; one that shared their views on the pursuit of higher ideals and standards for a better world and for a cleaner, sustainable future.

It is always such a disappointment when the Gods show feet of clay.

Tim O’Brien

TMR Managing Editor

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