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- The appointment of a government overseer to keep close tabs on VW engineers and ensure they obey U.S. laws marks a new low for the global auto industry. Now all three of the world’s largest auto manufacturers are under U.S. government oversight.
- Independent federal monitors are already in place at Toyota Motor and General Motors, both of which admitted their own criminal misdeeds to the U.S. Justice Department in recent years.
A federal judge in Detroit Friday approved a $4.3 billion settlement of criminal and civil fraud charges against Volkswagen AG, sentencing the German automaker to three years’ probation, including oversight by an independent monitor to prevent future misconduct.
In March 2014, Toyota pleaded guilty to misleading customers and U.S. regulators about safety issues related to unintended acceleration in its Toyota and Lexus vehicles. The Japanese automaker agreed to a $1.2 billion fine and an independent monitor to review and assess its safety record and reporting policies at least through August 2017.
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In September 2015, GM settled charges that it concealed an ignition switch safety defect from federal regulators and misleading consumers about it for years. Under a deferred prosecution agreement, GM pleaded not guilty but paid a $900 million fine and agreed to an independent monitor to oversee its recall and safety processes. If the government is satisfied, the charges could be dropped in 2018.
Automakers aren't the only ones. A major industry supplier, Tokyo-based Takata, also is under U.S. government oversight. It pleaded guilty last January to selling defective airbag inflators, and agreed to a $1 billion penalty and appointment of a compliance monitor. Meanwhile, the National Highway Traffic Safety Administration is working with an independent monitor to oversee the supply of replacement parts and manage future recalls.
All three cases involved deadly consequences. NHTSA confirmed 5 deaths were linked to Toyota’s unintended acceleration. GM compensated survivors of 124 deaths that were linked to its faulty ignition switches. Takata’s exploding air bags have been blamed for at least 11 deaths and more than 100 injuries.
No one has died from Volkswagen’s diesel emissions scandal, but officials say millions of people have suffered irreparable harm from inhaling toxic fumes from the company’s diesel-powered cars.
So why was Volkswagen’s federal punishment – a $2.8 billion criminal fine plus $1.5 billion to resolve civil charges --- so much worse?
Whereas GM’s crime was bureaucratic incompetence and Toyota claimed for years it couldn’t find an engineering flaw, Volkswagen is accused of deliberately taking regulatory shortcuts and lying about it for nearly a decade.
"This is a case of deliberate and massive fraud," U.S. District Judge Sean Cox said at Friday’s hearing in Detroit, according to Reuters. "This is a very serious and very troubling case involving an iconic automobile company," Cox added. "I just can't believe VW is in the situation it finds itself in today."
Volkswagen pleaded guilty to fraud, obstruction of justice and falsifying statements after admitting it conspired to skirt U.S. laws by installing illegal software on 580,000 vehicles that allowed them to pass government emissions tests even though pollution levels were far beyond legal limits in real-world driving.
Volkswagen General Counsel Manfred Doess said the company "deeply regrets the behavior that gave rise to this case. Plain and simple, it was wrong.”
The company later issued a statement:
Volkswagen deeply regrets the behavior that gave rise to the diesel matter. The agreements that we have reached with the U.S. government reflect our determination to address misconduct that went against all of the values Volkswagen holds so dear. They are an important step forward for our company and all our employees.
Since this matter came to light, we have worked tirelessly to address the misconduct that took place within our company and make things right for our affected customers. Volkswagen today is not the same company it was 19 months ago – the change process under way is the biggest in our history. We have taken significant steps to strengthen accountability, increase transparency and transform our corporate culture.
We know that there is more work to do. We will continue to press forward with these and many other important changes to the way we operate, as we work to earn back the trust of our stakeholders, build a better company and make Volkswagen an example of how a socially responsible company should act and lead in the years ahead."
The $4.3 billion settlement confirmed today is just one chunk of the massive costs VW will pay to resolve the diesel scandal in the United States. In total, VW has agreed to spend some $22 billion to buy back vehicles and settle legal claims from owners, environmental regulators, states and dealers.
As for government oversight, officials at Toyota and GM admit the extra prodding has had a positive effect. “We have a constructive working relationship with our federal monitor,” said GM spokesman Jim Cain. “He and his team have shared helpful insights and given us practical advice that we have acted upon.”
Toyota Vice President Scott Vazin agreed. “They’ve made our company a better company,” he said. “They’ve challenged us to make better processes. It’s been very constructive and fruitful.”
