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U.S. Justice Department Sues Volkswagen AG

BY: Alex Perrone


Volkswagen VW cheating in tests for pollution and emissions of its diesel motor in the us

The U.S. Justice Department sued Volkswagen AG last week, seeking billions of dollars in damages related to the recent an emissions-cheating scandal. This civil lawsuit, filed in federal court in Detroit, reaffirms allegations environmental regulators made last year that Volkswagen installed “defeat” devices to dupe emissions tests in 580,000 diesel-powered vehicles sold in the U.S. It significantly ramps up pressure on the company by putting the case before a federal judge and formally seeking court-ordered penalties.

The suit, filed by the Justice Department on behalf of the Environmental Protection Agency, seeks sanctions that could total more than $18 billion. Whether Volkswagen ultimately faces such a large penalty would be up to the judge.

ING analysts said they expect Volkswagen will seek to settle the matter out of court.

The car maker stressed this week Monday that it is working to ensure its vehicles will now meet legal standards. “Volkswagen will continue to work cooperatively with the EPA on developing remedies to bring the…vehicles into full compliance with regulations as soon as possible,” the company said in a statement.

The suit isn’t likely to be the final step in the U.S. government’s pursuit of Volkswagen, but rather could mark an opening move that paves the way for other actions. Monday’s legal action doesn’t involve criminal charges against Volkswagen or its executives, and federal prosecutors are in the midst of a separate criminal probe of the auto maker.

Top Volkswagen AG and U.S. environmental officials met briefly for the first time on Wednesday and parted agreeing to continue discussing ways to resolve the auto maker’s emissions violations, an outcome that suggests the two sides still remain at odds months after the crisis emerged. They gave no indication of progress following an hour long meeting at Environmental Protection Agency offices in Washington, D.C. In nearly identical statements, Volkswagen Chief Executive Matthias Müller and Gina McCarthy, head of the EPA, thanked the other for taking time to meet, and pledged to keep talking.

The face-to-face meeting, which was requested by Volkswagen, came a day after California regulators rejected the car maker’s plan to fix nearly 500,000 diesel-powered vehicles that were rigged to cheat on emissions tests, calling it vague and inadequate. The EPA said it agreed with California’s assessment.

“Every day there is not a resolution is a bad day for Volkswagen,” said Rebecca Lindland, senior analyst at automotive research firm Kelley Blue Book, adding she wasn’t surprised there was no resolution reached because of the complexity of the issues.

Technical negotiations on a repair to the vehicles are continuing and there could still be a deal reached between the two sides, analysts said, adding that the uncertainty makes it hard for Volkswagen to begin rebuilding trust with consumers and others in the U.S.

Mr. Müller had hoped that he could break the logjam in the talks through a personal encounter with Ms. McCarthy. He said on Sunday that his request to meet with the EPA chief was a show of good manners and that he hoped for a positive outcome. “I just want to say ‘hello,’ ” he said, adding: “We’ve been talking to the EPA for months. It’s a question of politeness.”

Instead, talks between Volkswagen and U.S. environment officials appear stuck over complex technical issues. Europe’s largest auto maker has been unable to sell two- and three-liter diesel-powered vehicles in the U.S. because of the violations and lack of certification for new models.

During this week’s North American International Auto Show in Detroit, Volkswagen executives repeatedly apologized for deceiving regulators and U.S. consumers. But they had appeared confident that they were close to a deal on a recall, and stressed their determination to resolve the issue.

Michael Horn, Chief Executive of Volkswagen Group of America, told reporters on the sidelines of the Detroit motor show that the U.S. recall would be multifaceted. It would include a fix for the emissions systems, but could also include other elements such as good public works and possibly buying back emissions credits that Volkswagen was awarded under false pretenses.

“We want to make this right in the American way,” Mr. Horn said. “We’ll do everything in our power to make it right.”

The California environmental regulators rejected the plan for fixing tainted vehicles, saying the proposals didn’t include enough information to allow them to fully evaluate the proposed solution. They said it was unclear how the solution would impact the performance, safety and emissions of the vehicles.

Both sides are still continuing negotiations. When reporters asked how long it will take to resolve the differences, Chris Grundler, head of the EPA’s office of transportation and air quality, said: “I don’t know.”

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