VW emissions scandal: While U.S. car owners are vindicated, Europe still unable to change its laws and protect its consumers

Volkswagen LogoVolkswagen, the giant German automaker, has pleaded guilty to criminal charges in a Detroit federal court last Friday to conspiracy to defraud the U.S., commit wire fraud, and violate the Clean Air Act, obstruction of justice and import violations.

However, VW still denies compensating European car owners arguing that a ‘technical fix’ can make cars compliant with the standards. The matter has been brought from both the European Commission and individual car makers but nothing has been done so far.

As the U.S. laws are tougher than the EU ones, Volkswagen may be able to get away with it given the fact also that the total amount of the affected EU cars is 11 million, a number way bigger to the 600,000 cars in the U.S. An EU fine similar to the U.S. one would clearly lead the company to bankruptcy.

VW pays dearly U.S. car owners

The German carmaker’s plea agreement includes a 2.8 billion dollars criminal fine and a 1.5 billion dollars civil penalty to settle the U.S. investigation. But this is not the end for VW which will have to pay settlements with consumers, regulators, dealers and state attorneys general of more than 20 billion dollars. Thus, it is clearly a serious but not lethal wound for the company.

But there are also current and former employees and executives to have charged in the criminal investigation. All the above have damaged the image of the firm which is now focusing on balancing its losses by expanding its share on the emerging markets.

VW agrees partnership with Tata Motors

VW and Tata have decided to join forces and boost their car sales in India where Tata is the largest vehicle company. VW’s Skoda unit is going to be leading this partnership and develop components and vehicles. VW’s need to recover from the dieselgate scandal which emerged in September 2015 and Tata Motors to regain domestic market share and launch new vehicles by 2019 are some of the reasons that led both companies to come to this agreement.

Representing Tata Motors, Guenter Butschek, chief executive and managing director, commented on this cooperation: “We strongly believe that both the companies, by working together, can leverage from each other’s strengths to create synergies and develop smart innovative solutions for the Indian and overseas market.”

On the other hand, Matthias Müller, chief executive of Volkswagen AG, said: “By offering the appropriate products, we intend to achieve sustainable and profitable growth in very different parts of the world.”

Furthermore, it must be mentioned that VW had attempted on expanding into emerging markets in the past through Suzuki Motor alliance which ended fiercely in 2015. As the developed world has lost faith in the German carmaker, VW is desperately looking for new chances and fresh car buyers at the developing world with Tata’s help.

Europe unable to protect its consumers

The European Commission has been showing some initiatives on the EU laws regarding the VW emission scandal but there is still much work to be done. EU industry commissioner Elzbieta Bienkowska proposed a reform of how car types are approved in Europe in January 2016.

EU industry Commissioner mentioned that it is a much broader issue which exceeds VW scandal. More specifically, Elzbieta Bienkowska said: “Let me be clear. This is not only about Volkswagen. There is systematic failure in the type approval system in Europe.”

However, the Council has not yet reached any conclusion with several issues to be yet outstanding. One of the disagreements of the EU member states is on whether to accept the EC’s proposal to have more oversight and emissions testing at EU level, or to require from national approving authorities that they check each other in peer-reviews.

The European system has not been able to provide any protection to its consumers in comparison to the U.S. where VW was forced to pay fines of up to 25 billion dollars vindicating the U.S. car owners. Furthermore, the European laws modification is not only crucial for the EU vehicle consumers but also for the EU citizens in order to reduce environmental pollution and harmful emissions to our air.

EU consumer authorities target VW

Consumer agencies from the 28 member states plan to act collectively against VW alleging that the use of defeat devices by the German company to cheat on emissions tests was a breach of EU law. Vera Jourova, the EU justice commissioner, has encouraged the authorities to protect the EU consumers by all means and will support them by coming to a final joint legal assessment.

Despite the good will of the EU justice commissioner, it is well known that the Commission cannot sue VW directly. European regulators should make all necessary corrections to the shortcomings in EU law in order to avoid similar incidents in the future providing better protection to the EU consumers.

A long fight

All in all, the chances for the EU car owners to be financially compensated by VW are very few given the fact that the EU law contains enough flaws for the German automaker to support its arguments.

However, the EU vehicle owners are not going to let it go without a fight. Even if it is very difficult to be vindicated, it seems that VW will face hard and long lawsuits.

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