Volkswagen AG is set to escape fines from the German government even after cheating on emissions tests for years, reflecting a softer political stance that’s increasingly drawing ire following a generous deal for U.S. drivers.
Germany’s influential Bild newspaper took Volkswagen to task for failing to compensate more than 2 million affected owners after Chief Executive Officer Matthias Mueller rejected compensation in Europe as an excessive burden. Little support is likely from the German government, with the Transport Ministry not planning to seek fines. The regulator is instead relying on a recall to resolve customer complaints and an ongoing criminal investigation to determine whether any further measures are warranted.
“We now have a situation in which Volkswagen is required to return the cars to a legally compliant condition,” German Transport Minister Alexander Dobrindt told reporters Wednesday in Berlin. “That is what is appropriate to remedy the damage that’s been done.”
While Volkswagen is paying affected U.S. owners as much as $10,000 each as part of a $15.3 billion settlement, Germany has balked at harshly punishing the manufacturer over rigging vehicles to turn on full pollution controls only during official tests. Germany, which is closely tied to Volkswagen via the state of Lower Saxony’s 20 percent stake and the political influence of the automaking giant, approved a low-cost fix that consists of a software upgrade and in some cases a piece of pipe with mesh on one end.
Adding on compensation could be crushing for Volkswagen as any deal in Germany would also probably apply to all 8.5 million tainted cars in Europe — 17 times the number in the U.S. That’s not stopping critics though.
“It’s not acceptable that the government doesn’t take any real consequences from the emissions scandal and gives a blank check for tricks and deceptions,” said Oliver Krischer, a member of Germany’s Bundestag from the opposition Green Party who is leading a parliamentary investigation committee. “It needs to be explained why companies in Germany don’t pay fines. It’s also not OK that European drivers are treated worse than American VW drivers.”
For a QuickTake explainer on Volkswagen’s emissions scandal, click here.
Instead of payments, “German customers get a letter and an appointment at the workshop to fix the cheating diesels,” Bild wrote in story published Wednesday. “Are German customers second class?”
Volkswagen declined to comment beyond Mueller’s statements in the newspaper interview from this weekend. The carmaker remains under criminal investigation in Germany, and that process could still yield fines.
Volkswagen CEO Mueller “is playing out a new card by telling the government: ‘Don’t put too much pressure on us, or we will go bust, and then all the jobs are gone’,” Christoph Rother, head of the Berlin office of law firm Hausfeld, which is involved in a class-action lawsuit against Volkswagen in the U.S. and represents clients in Germany. “He’s playing blackmail using a horror scenario,” rather than discussing options like vouchers for buying a new car.
The wide disparity in the handling of the crisis stems from equally large differences in legal and regulatory structures between the U.S. and the European Union. The lack of class-action lawsuits is a major disadvantage for European consumers, undermining their leverage in negotiations. Europe also doesn’t clearly ban switch-off devices — the bit of software at the heart of the scandal — and allows them to be used if they help protect the engine.
Germany has also been at pains to show emissions issues go beyond Volkswagen, strong-arming automakers in April to upgrade 630,000 vehicles to fix temperature-control setups that pushed the boundaries of regulation. It also tried to put pressure on Fiat Chrysler Automobiles NV, but was brushed off by Italy, which has authority over the company’s European vehicles.
“There’s an attempt to protect Volkswagen to a degree, as Volkswagen could be pushed to a breaking point if the same criteria applied in Germany as in the U.S.,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. “The Transport Ministry is also damaged by the whole affair, so they want it to go away.”