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VW Roundup: US Sues for Deceptive 'Clean Diesel' Campaign

March 29, 2016
Normally generous with shareholders, Volkswagen will also reportedly skip dividend payments in the wake of its emission scandal, and recall more than 5,000 American e-Golfs to fix batteries.

WASHINGTON, D.C. — The U.S. government filed suit against Volkswagen on Tuesday, charging the German automaker deceived American consumers by promoting supposedly “clean diesel” vehicles that were actually fitted with illegal pollution-cheating devices.

The Federal Trade Commission said it is seeking a federal court order requiring Volkswagen to compensate consumers who bought or leased more than 550,000 affected VW and Audi vehicles between late 2008 and late 2015, as well as an injunction to prevent Volkswagen from using the cheating devices again.

In its complaint filed in federal court, the FTC alleged that during this seven-year period Volkswagen deceived consumers by making false claims that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value.

The cars sold for an average price of approximately $28,000. “The hidden defeat devices will significantly reduce the vehicles’ resale value, the FTC said.

“For years, Volkswagen’s ads touted the company’s ‘Clean Diesel’ cars even though it now appears Volkswagen rigged the cars with devices designed to defeat emissions tests,” FTC chairwoman Edith Ramirez said in a statement. “Our lawsuit seeks compensation for the consumers who bought affected cars based on Volkswagen’s deceptive and unfair practices.”

The consumer protection and antitrust federal agency said Volkswagen’s promotional materials repeatedly claimed that the vehicles have lower emissions than gasoline cars, and reduce nitrogen oxides (NOx) emission by 90%. In fact, the FTC’s complaint said, they emit up to 4,000% more than the legal limit of NOx, a dangerous pollutant that contributes to environmental harms and respiratory ailments.

Volkswagen has been engulfed in a growing scandal since U.S. regulators announced in September the automaker had  installed software, known as a “defeat device,” that limits the output of NOx to U.S. legal limits during emissions test by regulators.

But when the vehicles are in actual use, the software allows them to spew poisonous gases well above the permitted levels, giving the cars better acceleration and fuel economy.

Volkswagen subsequently acknowledged it had installed emissions-cheating software in 11 million diesel cars worldwide.

In addition to still-unquantifiable regulatory fines from several countries, VW is facing a slew of lawsuits from angry owners of the diesel cars — notably in the United States and Germany — and from shareholders seeking damages for the massive loss in the value of their stocks since September.

VW Could Skip 2015 Dividend Payout

FRANKFURT, Germany — Volkswagen could forego a dividend payment to shareholders for 2015 in the wake of its massive diesel engine manipulation scandal, the German news agency DPA reported Tuesday. 

While a final decision has not yet been taken, “there is no sign that shareholders might even be able to hope for a single cent” in a dividend payout, DPA quoted an unnamed supervisory board member as saying. 

Contacted by AFP, a VW spokesman declined to comment on the report. “We will publish details of our business figures at our annual balance sheet news conference on April 28,” he said. 

In the past, VW has been very generous to its shareholders, and last year paid out 4.86 euros ($5.45) per preference share and 4.80 euros ($5.38) per ordinary share.

But the carmaker is currently engulfed in a scandal of global proportions after it was revealed that it installed software into 11 million diesel engines worldwide that intentionally skewed emissions values during testing. And the huge cash mountain it has amassed in recent years is likely to be needed to pay for the still incalculable fines and legal costs connected with the affair. 

VW has had to postpone both its annual news conference and its annual shareholder meeting as it struggles to cope with the fallout from the affair.

VW Recalls e-Golf Vehicles for Battery Fix

In related news, VW also announced Monday it is recalling about 5,200 e-Golf vehicles in the United States over a battery problem that can cause their electric engine to stall.

Volkswagen Group of America, VW’s US unit, is recalling certain 2015-2016 model years of the e-Golf. The company said “oversensitive diagnostics” in the high-voltage battery management system may inadvertently classify an electric surge as a critical battery condition.

“This can cause an emergency shutdown of the high-voltage battery, which in turn deactivates the vehicle’s electrical drive motor,” stalling the engine and potentially leading to a crash, the company said.

The National Highway Traffic Safety Administration said the recall started March 15. Volkswagen told owners to bring their vehicles to dealers for an update on the battery management software, the federal agency said.

The move is the latest in a wave of recalls that VW has announced in the wake of its emissions-cheating scandal. On top of still-unquantifiable regulatory fines from several countries, VW is facing a slew of lawsuits from angry owners of the diesel cars — notably in the United States and Germany — and from shareholders seeking damages for the massive loss in the value of their stocks since September.

Last Thursday Volkswagen said it was recalling around 800,000 luxury sport utility vehicles worldwide over a potential foot pedal problem, and on Tuesday it said it was recalling 177,000 of its new Passat cars in Europe owing to a potential electrical fault. The company also had to recall 680,000 cars last month in the United States due to possible faulty airbags supplied by Japanese maker Takata.

Copyright Agence France-Presse, 2016

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