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VW cheated on U.S. pollution tests for 'clean diesels' - LA Times

Since Porsche falls under the VAG umbrella and Volkswagen is potentially liable for up to $18 BILLION in fines, what happens to Porsche - or any of the other manufactures in the stable? Are they insulated? I hope so. I can't believe VW thought they would get away with this. Is the chance of a $37,500 fine PER VEHICLE really worth the risk? Looks like they may have to re-do that calculus.

I also wonder if the Porsche and Audi diesels are also affected by this. I hope not.

Update: The recall involves 4-cylinder Volkswagen and Audi vehicles from model years 2009-15.
 

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Volkswagen accused of cheating on emission testing

"The Environmental Protection Agency accused the German automaker of using software to detect when the car is undergoing its periodic state emissions testing. Only during such tests are the cars’ full emissions control systems turned on. During normal driving situations, the controls are turned off, allowing the cars to spew as much as 40 times as much pollution as allowed under the Clean Air Act, the E.P.A. said."

They could be fined up to $18 billion plus face criminal charges. This could significantly affect VW's reputation and bottom line. I wonder how it will affect Porsche?

http://www.nytimes.com/2015/09/19/business/volkswagen-is-ordered-to-recall-nearly-500000-vehicles-over-emissions-software.html?hp&action=click&pgtype=Homepage&module=second-column-region&region=top-news&WT.nav=top-news
 

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It's very unlikely VAG will have a $18B fine. The news always likes to state the highest fine, but it's rarely the highest possible fine. I'm also sure VAG has some sort of insurance that covers a portion of any fine or cost of repairs. Don't be surprised if there's a class action lawsuit from car owners. Even if VAG goes through bankruptcy, I'm sure Porsche, Audi, Lambo, Bentley won't be impacted due to a corporate structure that protects them.
 

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Seems to me that Porsche could be significantly affected by this since if the parent company (VW) has less capital to invest in its subsidiaries due to a bankruptcy, then Porsche has less $ to invest in design and manufacturing of new models.
 

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I'm sure Porsche will be affected, but I caution to say at a much lesser extent, each product line should be somewhat insulated from each other in this type situation. Of course there will be a "trickle down" effect no doubt. Hopefully it won't affect Porsche's R&D, etc....too much.
 

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It seems like corporate bankruptcy in the auto industry is merely a hiccup in the process . Look at GM arise from near shutdown and then to ignition problems post bailout to produce the C7 . In 08 Porsche dealerships did close and at least one declared bankruptcy but sales still thrived . Fiat almost hit bankruptcy too only to come back with a (horrible) little car . There was also the Audi 5000 debacle in the 90's where the press release on 60 minutes cut sales down tremendously . look at them now ! Thriving !!
 

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It's very unlikely VAG will have a $18B fine. The news always likes to state the highest fine, but it's rarely the highest possible fine. I'm also sure VAG has some sort of insurance that covers a portion of any fine or cost of repairs. Don't be surprised if there's a class action lawsuit from car owners. Even if VAG goes through bankruptcy, I'm sure Porsche, Audi, Lambo, Bentley won't be impacted due to a corporate structure that protects them.
Agreed. But consider that the enormous size and scope of VAG may render it well-able to withstand an $18B fine and residual lawsuits owing to the many safeguards in place, as mentioned. However, I believe their credibility will take an enormous hit because the crime was premeditated and intentional, defrauding the customers, the government, and the environment. And that hit could possibly bring down the company if they are perceived worldwide as untrustworthy. The punishment will be substantial and it should be! There is absolutely no legitimate excuse for this deception!

Although none of my vehicles would have been impacted, I feel personally "hurt" about this because I've owned several VW vehicles over the years and presumed they were a company of integrity!

Simply confidence-shaking and shameful!!

:(
 

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Agreed. But consider that the enormous size and scope of VAG may render it well-able to withstand an $18B fine and residual lawsuits owing to the many safeguards in place, as mentioned. However, I believe their credibility will take an enormous hit because the crime was premeditated and intentional, defrauding the customers, the government, and the environment. And that hit could possibly bring down the company if they are perceived worldwide as untrustworthy. The punishment will be substantial and it should be! There is absolutely no legitimate excuse for this deception!

Although none of my vehicles would have been impacted, I feel personally "hurt" about this because I've owned several VW vehicles over the years and presumed they were a company of integrity!

Simply confidence-shaking and shameful!!

:(
I agree with this in fairness principle but am not sure it will translate into reality. keep in mind that if an iconic auto manufacturer does shut down the effect is tremendous .
 

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I agree with this in fairness principle but am not sure it will translate into reality. keep in mind that if an iconic auto manufacturer does shut down the effect is tremendous .
Larry, I totally agree. I felt really bad when Saab shut down. But the problem I have with the VW scenario is not that they manufactured a bad or defective or unpopular car, but that they knowingly and secretly programmed it to skirt the law, and as a result the customers are affected now with poor resale values, and the environment is adversely affected as well. This is a deliberate crime! And the person who designed this program should be in jail... and have his Becks beer cut off!!

:(
 

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Discussion Starter #11
The EPA has the power to levy fines, the DOJ is initiating a criminal investigation and has directed a recall. The affected vehicles will have significantly reduced performance once the proper emissions controls are applied. I think the class action liability is extremely high.
Also, I would assume that the bankruptcy rules in Germany are different than those of the US. Maybe Germany will have to have some kind of bailout for VW. I don't know, but I'm glad I'm not a shareholder right now - which is another group that will likely have a class action due to the company not abiding by its fiduciary duty.
The fact the this was a willful act will destroy any chance of leniency, I believe. The effects of this will reverberate for at least a decade.
 
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The EPA has the power to levy fines, the DOJ is initiating a criminal investigation and has directed a recall. The affected vehicles will have significantly reduced performance once the proper emissions controls are applied. I think the class action liability is extremely high.
Also, I would assume that the bankruptcy rules in Germany are different than those of the US. Maybe Germany will have to have some kind of bailout for VW. I don't know, but I'm glad I'm not a shareholder right now - which is another group that will likely have a class action due to the company not abiding by its fiduciary duty.
The fact the this was a willful act will destroy any chance of leniency, I believe. The effects of this will reverberate for at least a decade.
I have spent a few hours reading articles on this and they all contradict each other but the last one i read does claim that VW admits it (see below) . If this is true it's horrible news .This article lists the recall models . I'm surprised they didn't list the Toureg TDI .

http://www.nytimes.com/2015/09/19/business/volkswagen-is-ordered-to-recall-nearly-500000-vehicles-over-emissions-software.html?hp&action=click&pgtype=Homepage&module=second-column-region&region=top-news&WT.nav=top-news

"Agency officials issued the car company a notice of violation and said it had admitted to the use of a so-called defeat device. "
 

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Sure it's a hit to brand credibility, but there's a long line of automakers in front of Volkswagen. (See Honda and its air bags, Toyota, Ford, and GM - all had massive recalls for cutting corners and failing to disclose known defects.) It's business as usual, and the consumer moves on.

As to the hit to bottom line, it's way too early to tell. The fines and penalties are often subject to a legal challenge which produces a negotiated settlement years later that teh company knows it can handle. (See the BP Deepwater Horizon $18.5B settlement with the Feds and several states.) The consumer class action suits and derivative actions, if not settled at a number feasible to VW, may result in runaway verdicts years from now, but if they do Chpt 11 BK will provide needed relief and leverage to reduce the number to a more manageable sum. (See Texaco and how it addressed the Pennzoil verdict.)

Not too worried about Porsche (or any other band in VAG stable) at this time.
 

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Wow - that is horrible that they intentionally lied to the government and most of the consumers about their diesels. I am a diesel enthusiast and is the only car that I buy and would be ticked off if I had purchased one of those cars that VW labels as "Clean/Green Diesels". I am surprised it did not affect all brands VW diesels, including the Touareg, Audi Q5, A6 and Porsche Cayenne.

VW was already struggling selling cars in the US compared to Honda, Toyota, etc.... This might really hurt them.
 

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it makes you wonder about the corporate culture that exists at VAG that this could happen. VAG will survive just like some of the more recent recall issues hasn't taken down Dodge/Chrysler or Toyota.....but why would a consumer buy from what many will perceive as a deceptive company. Easy solution....make VWs even more affordable and many in the US will overlook it.....folks go for deals. US VW sales are struggling, and it will only get worse.
 

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Since Porsche falls under the VAG umbrella and Volkswagen is potentially liable for up to $18 BILLION in fines, what happens to Porsche
Nothing.

There is no way the fine will be $18B. Kia/Hyundai did the same thing with, 1,000,000 cars and was fined, effectively, $300M in a settlement. This is 500,000 cars. Do you think DOJ, is going to fine VAG $18B? 2014 VW profit was $12B. Even if they fined them, they have nearly 40B Euros in cash.

DOJ will do a settlement, more than the Kia/Hyundai fine due to the willful act, maybe up to a magnitude greater, maybe up to $3B. There will be a press release saying how shameful this is and the EPA takes this stuff seriously, and then back to business as usual.

If VAG went out of business, what happens to Porsche? Since the Porsche SE owns VAG (51%) whose assets far exceed $18B, its just not going to happen. This is a case of too big to fail. But if push came to shove, I would expect the family to just start another small Porsche manufacturing company to preserve their heritage.
 

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Sure it's a hit to brand credibility, but there's a long line of automakers in front of Volkswagen. (See Honda and its air bags, Toyota, Ford, and GM - all had massive recalls for cutting corners and failing to disclose known defects.) It's business as usual, and the consumer moves on.

As to the hit to bottom line, it's way too early to tell. The fines and penalties are often subject to a legal challenge which produces a negotiated settlement years later that teh company knows it can handle. (See the BP Deepwater Horizon $18.5B settlement with the Feds and several states.) The consumer class action suits and derivative actions, if not settled at a number feasible to VW, may result in runaway verdicts years from now, but if they do Chpt 11 BK will provide needed relief and leverage to reduce the number to a more manageable sum. (See Texaco and how it addressed the Pennzoil verdict.)

Not too worried about Porsche (or any other band in VAG stable) at this time.
...cutting corners and failing to disclose defects, while criminal, is not as high a crime as willfully designing a car for deception in order to skirt emissions laws and to fool the consumer with fake performance specifications!! This will surely result in higher consequences for VW, the world's largest manufacturer of diesel cars!! The model will be known as "The VW Deceptive Diesel!!" Truly sad!! Heartbreaking!! What other yet-to-be-discovered deceptions might be built into their product line??

Since this has been going on for years, I suppose it might be considered a futile attempt at survival in the face of competition. But there are better and lawful ways to beat competition!!

:(
 

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I'm not defending what they did: it's not defensible. Just trying to insert a bit of perspective on the whole BK thing. This is a company with close to $90B in shareholder equity and $10.8B in net income (2014). A bit tight these days on free cash flow, perhaps. The sky is not falling on them, notwithstanding the intent behind their actions.
 

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