Volkswagen Emissions Scandal Could Cost VW $18 Billion In Fines

Volkswagen made major news headlines recently amid allegations that they purposefully skirted emissions laws using a software trick. It’s a trick that could cost them tens of billions in fines. The EPA announced September 18 it had issued a notice of violation to Volkswagen AG, Audi AG and the Volkswagen group of America. The EPA said VW broke the clean air act by formulating their software to cheat emissions tests.

Essentially, the vehicle software would detect an emissions test in progress and put on the full vehicle emissions controls during that time. After an emissions test, the diesel vehicle would revert back to producing emissions 10 to 40 times the legal limit. In an EPA press release Cynthia Giles, assistant administrator for the Office of Enforcement and Compliance Assurance said, “Using a defeat device in cars to evade clean air standards is illegal and a threat to public health. Working closely with the California Air Resources Board, EPA is committed to making sure that all automakers play by the same rules. EPA will continue to investigate these very serious matters.”

This announcement and charge from the EPA isn’t simply a theory, VW admits that they did use a software trick in a half million vehicles made between 2009 and 2015 to get around emissions testing. In response the EPA is forcing VW to recall 482,000 vehicles including Jetta, Passat, Sportwagen, Beetle and Audi A3 models with a 2.0-liter diesel engine. In a statement, the CEO of Volkswagen AG, Dr. Martin Winterkorn, apologized for what his company did.

In a statement, Winterkorn explained, “I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case.” Volkswagen could face fines of up to $18 billion and potentially even criminal prosecution for executives.

VW Investors didn’t do well with this news as the company stock dropped 20 percent when trading opened today. The automaker has asked dealers to stop selling certain recalled diesel vehicles made between 2009 and 2015.

The news that VW has a large recall on their hands and that they are taking six years of diesel vehicles off the market is not good news for Volkswagen and Audi dealers. Do you think as soon as the VW software is fixed that it will be business as usual for VW and Audi dealerships? How could this situation impact the outlook for VW dealership sales through 2016?