If you own a VW diesel guilty of “cheating” Uncle, you’d better scuttle on down to your local VW store. Not to “fix” it (they’re not broken) but to get your money before there’s none left.
On Tuesday, Uncle announced the most draconian punishment ever meted out to a car company over the TDI “cheating” scandal: $15 billion in forced buyback/loan forgiveness offers and funding for “environmental programs” and the promotion of electric/hydrogen fuel cell vehicles.
On top of this, VW has agreed — been forced — to pay out another $600 million in separate settlements with 44 states plus the District of Columbia and Puerto Rico.
The cost of pending civil litigation — not covered by the above — hasn’t yet been calculated. But it could be the biggest and most expensive class-action payday ever. There are at least half a million potential litigants.
It could be curtains for Volkswagen.
$15 billion is a staggering sum. An impossible sum.
It dwarfs the cost borne by Ford back in the late 1970s over the Exploding Pinto fiasco — a mere $127 million (later reduced to $6 million, or about $24 million in today’s dollars). In the early 2000s, Ford had to pay out about $2.4 billion to settle claims arising from the Ford Explorer/Firestone tire rollover debacle.
And Ford is a major automaker, one of the Big Three. Its cars account for about 15 percent of all cars sold in the U.S.
VW has — had — a market share around 3 percent.
The math is very, very bad.
Ford would have trouble dealing with a $15 billion dollar hit (probably more like $20 billion once the civil litigation is figured in).
And VW is not Ford.
Where will all the geld come from?
Maybe VW has a geldscheisser. You know — like the private banking cartel that controls the money supply.
The good news is that owners of the “affected” vehicles won’t be forced to turn in their cars (to be destroyed) but VW will be forced to buy them back if they do.
Well, so long as VW has the funds available to do so.
Which could be not for long.
Each owner will get (if he hurries) the pre-scandal “clean” Blue Book value of his car, plus a cash award in addition ranging from $5,100 to $10,000. Or, the owner can elect to keep his car and wait for VW to “fix” it (the details of this have yet to be determined). These people will still get the $5-$10k payday. People who still owe on a loan may have the balance due forgiven and people who are leasing an “affected” model will have the opportunity to turn the car in early without penalty.
About half a million cars are “affected,” dating back to the 2009 model year. Under the terms of the agreement with Uncle, VW must either buy back or “fix” 85 percent of these cars by June 30, 2019. If it fails to do so, Uncle will hit the company with another $85 million in fines for each percentage point below 85 percent.
That alone is four times what Ford had to pay out to make amends for the Exploding Pintos — which actually hurt (actually killed) actual people.
Who has been hurt by VW’s “cheating”?
The fact is no one’s suffered so much as a bad hair day.
Uncle is aggrieved because VW dodged his increasingly unreasonable exhaust emissions fatwas. But what’s the Big Whoop, really?
The “affected” cars emitted fractions of a percent more NOx (oxides of nitrogen) than Uncle decreed permissible. That’s it. The harm allegedly resulting from this is purely hypothetical. It is claimed a few dozen people — hypothetical people — might experience asthma-related symptoms. But no actual victim has yet been trotted out. And the “affected” vehicles would have easily passed muster with Uncle’s edicts of the early 2000s.
Were those cars “dirty”?
Who was harmed by them?
It’s interesting to observe that Uncle is much less aggrieved about the lethal airbags it has mandated be placed in front of all our faces every time we get behind the wheel.
These actually kill actual people.
Where are the double-digit billion fines and massive buyback offers?
Uncle won’t even allow people who own cars equipped with known-to-be-lethal air bags made by Takata to have the got-damned things disabled pending a fix. See here.
It shows what Uncle really cares about.
Which isn’t our “safety” — much less our lives.
It is obedience to Uncle.
VW sin was disobedience — and the punishment for that is severe.
If the automaker had merely sold defective cars, it would be no big deal. Or much less of one. When people get killed, the payouts and other consequences are trivial. Big numbers, by the standards of you and me, perhaps. But nothing a major corporation can’t handle.
But $15 billion? That’s a whole lot of money — even for a major corporation.
At the very least, it will cripple VW’s ability to update its cars for the foreseeable future. Expect stagnation for the next several years — which will be devastating to its competitiveness. Market share — already dwindling — is likely to continue to dwindle. Even though there is nothing functionally wrong with any of the “affected” cars, the taint of scandal has already caused their value to depreciate by double digits. See here. This will continue.
How does VW survive?
It will take years of profitability to recover the $15 billion; years (VW has openly admitted this) of VW not making any profit at all.
The Explorer/Firestone Tire debacle nearly killed Ford — and it was a much smaller debacle (for a much larger automaker).
Better get in line soon.
And don’t wait to cash that check, either.